The Future of Digital Currency: Australia's eAUD Pilot Project

• Financial

The Reserve Bank of Australia (RBA) has taken a significant step towards the possibility of creating a central bank digital currency (CBDC) with the announcement of its eAUD digital currency pilot phase. The pilot project will be conducted in collaboration with the Australian Digital Finance Research Centre, and several companies, including ANZ, Mastercard, and Canvas Digital, have been invited to participate in a study of 14 eAUD use cases.

Understanding the Potential Benefits of CBDC

The pilot phase and accompanying research study are crucial steps in gaining a better understanding of how CBDC could potentially benefit the Australian financial system and economy.

The findings of the project will contribute to practical learning and provide policy makers with valuable information to inform future decisions.

Consultation Documents to be Published in 2023

Documents obtained by The Australian Financial Review through freedom of information laws suggest that the government intends to publish consultation documents in the second quarter of 2023.

This will provide stakeholders with an opportunity to offer their perspectives on the potential issuance of a CBDC.

Canvas Digital Joins the Pilot Project

Canvas Digital, a layer 2 blockchain built on ethereum, will also be participating in the pilot project.

The company uses ZK (Zero Knowledge Proof Protocol) technology to facilitate transactions and will pilot foreign exchange transaction settlements using Circle's USDC stablecoin and eAUD. The use of ZK-rollups technology is intended to increase the efficiency of the underlying blockchain and reduce settlement time and transaction costs.

Weakened Demand for Cryptocurrencies

The Australian Department of Finance believes that the recent collapse of FTX has resulted in a "weakened significantly" demand for cryptocurrencies, which could provide more time for the government to address regulations.

According to a brief from Australian Treasurer Jim Chalmers, "Treasury considers these concerns are somewhat mitigated by the current market conditions resulting in less consumer demand for crypto assets."

Consultation open!

Today we released the token mapping consultation paper. This consultation is part of a multi step reform agenda to develop an appropriate regulatory setting for the #crypto sector. Read paper & submit views @ https://t.co/4W2msjhP9B @ASIC_Connect @AUSTRAC pic.twitter.com/OGHuZEGvDp — Australian Treasury (@Treasury_AU) February 2, 2023

A Growing Trend: CBDC Adoption Around the World

More than 10 countries have already launched a CBDC, and 89 countries are either piloting, developing, or exploring the possibility of issuing a CBDC.

For example, the Federal Reserve in the United States has been exploring the concept of issuing its own tokenized dollar for years and recently announced the hiring of individuals to help design and develop a digital version of the US dollar.