MNI Policy: "No Case" for Retail Digital Currency: RBA

The Reserve Bank of Australia said that there is "no strong policy case" to introduce a digital version of the Australian dollar, but it is keeping an "open mind" if circumstances change in the future.

In a discussion paper released today the RBA said that the efficiency and widespread acceptance of electronic payments systems in Australia meant that demand for a so-called Central Bank Digital Currency (CBDC) would likely be low, and therefore not justify the large investment required.

"Even though the use of cash for transactions is declining, [it] is still widely available and accepted as a means of payment," the paper said.

NEW PAYMENT SYSTEM

"Households and businesses are also well served by a modern, efficient and resilient payment system that has undergone significant innovation in recent years, including the introduction of the New Payments Platform, a new real-time, 24/7 and data-rich electronic payments system."

As well as being expensive, introducing a CBDC, could require legislative change, and may also have negative implications on financial stability in the event of a "run" on the currency, the paper said.

The paper noted that the RBA does currently issue a form of digital money as balances in Exchange Settlement Accounts (ESAs) used by commercial banks in exchange for providing the RBA with government securities or other high-quality assets.

While there is currently no strong case for a CBDC, the RBA is continuing to monitor the issue, looking at potential designs and also the impact on the financial system.

WHOLESALE CBDC

Separate to looking at a retail CBDC, the bank is also conducting research on the technological and policy implications of a wholesale digital currency.

This work is taking place at the RBA's in-house innovation lab and included the development in 2019 of a limited proof-of-concept of a distributed ledger technology-based interbank payment system using a tokenised form of CBDC backed by ESA balances.