Australia’s central bank commits to wholesale CBDC, sidelining retail option

The Reserve Bank of Australia (RBA) plans to prioritize developing wholesale central bank digital currency (CBDC) over the retail version. RBA Assistant Governor Brad Jones disclosed this during a speech at the Intersekt Conference on September 18, noting that the top bank has launched a three-year plan called Project Acacia to realize its goals.

According to Jones, the RBA is focusing on wholesale CBDC because its research shows that retail CBDC does not offer many benefits for the Australian economy and will be challenging to implement compared to retail. In his speech, he highlighted the several arguments for creating retail CBDC, noting that such issues are irrelevant to Australia.

He said:

“Our assessment is that the potential benefits of a retail CBDC generally appear modest or uncertain at the present time, relative to the challenges it would introduce. Most of the arguments made internationally in support of a retail CBDC reflect issues that are either of limited relevance to Australia, or where it is not obvious that a retail CBDC would best address them.”

Some issues highlighted include monetary resilience, cost and efficiency, financial inclusion, and monetary sovereignty. Jones claims that these do not have much impact on Australia as the country’s current financial system already offers sufficient solutions to cover them. However, he added that the RBA and Treasury will still reassess the need for retail CBDC and plan to release a follow-up paper by 2027.

Wholesale CBDC to benefit central and commercial banks

Meanwhile, Jones said wholesale CBDCs will offer several benefits to the central bank and commercial banks, making it the preferred option for the RBA to pursue now with the launch of Project Acacia.

He said:

“I can confirm that the RBA is making a strategic commitment to prioritize its work agenda on wholesale digital money and infrastructure – including wholesale CBDC – rather than retail CBDC.”

Some of the benefits he identified include reducing counterparty and operational risks, improving capital efficiency, increasing transparency, high liquidity, improved transactability, and reducing compliance costs and the number of intermediaries.

Although the plan is still very much in the research and exploratory stage, it is clear that the RBA plan focuses on tokenization, both real-world assets and cash. Jones noted that central banks already have experience issuing digital money to financial institutions, making the introduction of wholesale CBDC a mere improvement on existing practices rather than a complete sector revolution.

Project Acacia to launch public phase

With RBA now focused on wholesale CBDC, Jones has announced that the public phase of Project Acacia is the immediate priority as the RBA seeks to build on its earlier CBDC pilot project. Beyond that, the project will also consider the cross-border application of the CBDC with other regional central banks.

He said:

“Project Acacia aims to build on the lessons from our CBDC pilot last year by focusing on opportunities to uplift the efficiency, transparency and resilience of wholesale markets through tokenized money and new settlement infrastructure.”

Meanwhile, RBA plans to start advisory forums on CBDC comprised of industry stakeholders and academics in 2025, noting that it has had engagements with them but wants to formalize the structure for future discussions on monetary policy issues. However, 2025 will also see reforms to the existing regulatory sandbox for financial innovation, enabling new businesses to test out their financial products and services more effectively.

The RBA is not working alone on the three-year CBDC plan; it is partnering with the Treasury to actualize its goals.