The Reserve Bank of Australia (RBA) and Treasury have released a joint report updating their research into the case for introducing central bank digital currency (CBDC) in Australia.

The report showcased the three-year roadmap summarising future plans for introducing digital money into the retail payments space in Australia, revealing momentum has shifted toward “enhancing the functioning of wholesale markets in Australia”.

Brad Jones, Assistant Governor (Financial System) at the RBA, said the future work towards a CBDC program would prioritise wholesale applications.

“The RBA is making a strategic commitment to prioritise its work agenda on wholesale digital money and infrastructure – including wholesale CBDC,” he said.

“At the present time, we assess the potential benefits as more promising, and the challenges less problematic, for wholesale CBDC compared to a retail CBDC.

“Next month, we will launch the public phase of Project Acacia, which will explore opportunities to uplift the efficiency, transparency and resilience of wholesale markets through tokenisation and new settlement infrastructure.

“This initiative will form part of a larger effort to step up our engagement with industry and other stakeholders on the question of how our monetary arrangements could better support the Australian economy in the digital age.”

The report also confirmed that there is currently “no strong case” for introducing a retail CBDC to the Australian payments system.

“Compared to retail CBDC, the potential benefits and use cases for a wholesale CBDC seem more tangible at this point. Potential benefits could also be realised in a minimally disruptive way in a wholesale setting, building on key features of the monetary system that have served the Australian financial system well for decades,” the report said.

“A ‘wholesale CBDC’ could be used in wholesale payments and settlements between financial institutions. This could allow for greater functionality than is possible with today’s ESAs [Exchange Settlement Accounts] that are the bedrock of wholesale market transactions in Australia. Yet another (though less potentially transformative) possibility is that the supporting infrastructure for ESAs is upgraded, to provide for more functionality than is currently available.

“As a practical matter, a CBDC (retail or wholesale) would be issued by the RBA. However, the introduction of a retail CBDC for use among the general public would entail material changes to the financial arrangements of Australia. Because of this, the Australian Government would ultimately decide whether to introduce a retail CBDC and, if introduced, may have to enact enabling legislation and/or regulatory reforms.

“In the case of wholesale CBDC, the legal, regulatory and primary decision-making implications would depend on the design and scope of its use, including the extent of transformation enabled by these innovations in the clearing and settlement of wholesale market transactions.

“Irrespective, the Government, Treasury and RBA would closely consult ahead of any decision to issue a CBDC, should a public policy case for doing so emerge in the years ahead.

“As a result of these assessments, the future work program of the RBA and Treasury will prioritise CBDC initiatives in wholesale applications. This will include the RBA stepping up its experimental project work and wider engagement with industry, academia and peer central banks, while Treasury will support the Government in considering enhancements for regulatory sandbox arrangements and clarify the regulatory arrangements for stablecoins and other types of digital assets.

“However, the distinction between wholesale and retail CBDC could become blurred. There are proposals to make wholesale CBDC available to a wider set of market participants than ESAs, and those are not yet clear on where that expansion should end.

“The larger the expansion in access, the more retail in nature the usage could become. Compounding this challenge is a possibility that wholesale CBDC could also be used as a one-for-one backing asset for privately issued forms of digital money issued for retail purposes (such as stablecoins). In this case, a wholesale CBDC could effectively be held by retail users, albeit in an indirect way.”