Australia’s central bank to research Ethereum-based CBDC

Australia’s central bank announced a collaboration with other institutions and a major private blockchain firm to research creating its own central bank digital currency (CBDC).

According to a Nov. 2 announcement, the Reserve Bank of Australia partnered with the Commonwealth Bank, National Australia Bank, financial services firm Perpetual, and Ethereum-centric blockchain firm ConsenSys Software. The project is expected to be completed around the end of the current year, and the involved parties will release a report on the findings during the first half of 2021.

The alliance will investigate the potential use and implications of a wholesale form of CBDC using distributed ledger technology (DLT), which is not accessible to consumers but only to financial institutions—and in some cases other parties that move large quantities of money. 

“With this project we are aiming to explore the implications of a CBDC for efficiency, risk management and innovation in wholesale financial market transactions,” said Michelle Bullock, the central bank’s assistant governor (financial system). “While the case for the use of a CBDC in these markets remains an open question, we are pleased to be collaborating with industry partners to explore if there is a future role for a wholesale CBDC in the Australian payments system.”

The project’s goal is to develop a system allowing the institutions to carry out a proof-of-concept (POC) transaction for the funding, settlement, and repayment of a tokenized syndicated loan on an Ethereum-based platform.

The Reserve Bank of Australia noted that this is just the latest development in the ongoing research it is conducting on wholesale CBDC implementations. 

It is hardly the first central bank to work on this type of project. In May, the Banque de France partnered with banking giant Société Générale to issue $44 million worth of covered bonds as security tokens registered on a public blockchain. The issue was fully subscribed by the bank, which simultaneously paid the issuer in digital euros issued by Banque de France.

The main reason why many institutions advise against retail implementations—the ones that are accessible to consumers—is that it could disintermediate traditional financial institutions and severely hurt the private banking space.