Australia's Central Bank Explores Wholesale CBDC, Sees Limited Retail Demand

The Reserve Bank of Australia (RBA) has released a report indicating that the country is more likely to pursue a wholesale central bank digital currency (CBDC) rather than a retail version. The central bank cites the resilience and capabilities of Australia's existing retail payments system as a key factor in its assessment, suggesting that the public interest case for a retail CBDC has yet to be firmly established.

Unlocking Efficiency, Transparency, and Resilience in Wholesale Markets

Wholesale CBDC: A More Promising Prospect

The RBA's report suggests that the potential benefits and challenges associated with a wholesale CBDC are more favorable compared to a retail CBDC. According to the central bank's assistant governor, Brad Jones, "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."The RBA's focus on a wholesale CBDC aligns with the broader global trend, as the report notes that 134 countries, representing 98% of the global economy, are currently exploring CBDC initiatives. While only three countries have launched CBDCs so far (The Bahamas, Jamaica, and Nigeria), the report indicates that the number of countries piloting digital currencies has increased from 36 in 2023 to 44 in 2024.

Enhancing Wholesale Market Efficiency and Resilience

The RBA's upcoming "Project Acacia" aims to explore the potential of tokenization and new settlement infrastructure to uplift the efficiency, transparency, and resilience of wholesale markets. This initiative suggests that the central bank sees significant opportunities in leveraging CBDC technology to streamline and strengthen the country's financial infrastructure, particularly in the wholesale sector.The report's emphasis on the wholesale CBDC approach reflects the RBA's assessment that the existing retail payments system in Australia is already well-served and meeting the needs of users. This contrasts with the motivations driving CBDC development in other jurisdictions, where the public interest case for a retail CBDC may be more compelling.

Cautious Approach to Retail CBDC

The RBA's report acknowledges that its assessment of the potential benefits and challenges of a retail CBDC could change as the central bank gains a better understanding of the costs and benefits involved. However, at the present time, the central bank's position is that the case for a retail CBDC in Australia has yet to be firmly established.This cautious approach aligns with the RBA's broader stance, as the central bank had previously stated that a CBDC for Australia was likely "some years away," given the country's well-functioning payments system and the exploratory nature of digital currency work in most advanced economies.

Exploring the Wholesale CBDC Opportunity

The RBA's focus on a wholesale CBDC reflects a strategic decision to prioritize the potential benefits and address the challenges associated with this particular CBDC model. By concentrating on the wholesale sector, the central bank aims to leverage the technology to enhance the efficiency, transparency, and resilience of Australia's financial infrastructure, ultimately strengthening the country's overall economic competitiveness.As the global CBDC landscape continues to evolve, the RBA's approach serves as a reminder that the specific needs and circumstances of each jurisdiction can shape the central bank's digital currency strategy. While retail CBDC initiatives may be gaining traction in other parts of the world, Australia's central bank has determined that a wholesale-focused approach is the more promising path forward for the country at this time.