Australia Makes U-turn: Considers Issuing A Central Bank Digital Currency

A few months ago after saying it has no plans to issue a Central Bank Digital Currency (CBDC), the Reserve Bank of Australia (RBA) is exploring the possibilities of issuing a national digital currency. 

“The RBA is researching the technologies and policy implications of a potential wholesale central bank digital currency,” Philip Lowe, the governor of the apex bank noted today in a Daily Mail report. 

According to Lowe, financial institutions in Australia could conduct transactions using CBDCs, instead of conventional banknotes in the future. 

He added that the apex bank’s innovation lab is already working on a concept that will involve using the tech that powers cryptocurrencies – blockchain, in the development of its CBDC. Lowe promised to share more insights about the bank’s CBDC plans in the future. 

Central Banks Interests’ In CBDC Spikes 

In the past years, central banks have been conducting experiments to develop the digital-version of their official currencies. 

This move is triggered by the increasing demand for digital currencies, as popular cryptocurrencies like Bitcoin (BTC) and Ether (ETH) continue to go mainstream, and fiats are seen as obsolete forms of payments. 

While developing CBDCs has been a major topic since 2019, nations picked interest in it early last year during the peak of the coronavirus (COVID-19) pandemic. 

Reports had it that the virus could be transmitted through the use of fiat currencies, which sparked more interest in CBDC from central banks. 

According to a survey conducted by the Bank of International Settlement (BIS), at least 80% of central banks globally are weighing the pros and cons of issuing a CBDC backed by their national currency. 

However, the RBA was not included among the banks considering launching a CBDC. 

Tony Richards, the Head of Payments Policy at the RBA confirmed in November that Australia was not planning to issue a CBDC, adding that the bank is more focussed on blockchain than creating a ‘digital alternative to [its] cash.’  

Lowe’s push for a CBDC in Australia comes as cryptocurrency goes mainstream, with more institutional investors getting involved.