The Reserve Bank of Australia aims to complete its pilot project regarding the CBDC introduction by the middle of the year 2023 as outlined in its white paper published today.
The Reserve Bank focuses on providing additional clarifications on the major technological, legal, and regulatory aspects associated with the implementation of CBDC initiatives in Australia. The CBDC will have a form of liability of the Reserve Bank, and both its retail and wholesale alternatives will be implemented. All industry participants have an opportunity to provide their suggestions and initiatives. They will be closely examined by regulatory leaders before making the ultimate decision.
Various use cases can be considered in order to identify potential challenges and potential responses by different stakeholders. The project aims to analyze the maximum number of use cases to precisely outline the major public benefits that can be generated in this manner. The project should allow to determine the major benefits, risks, and operational models associated with the implementation of CBDC in Australia. In this manner, the most appropriate technology to be used for realizing the CBDC functionality can be determined.
The project ecosystem will include both use case platforms and the pilot CBDC platform. The former is developed and operated by use case providers with the orientation to the dominant needs of end users. The Pilot CBDC Platform is implemented via privacy gateway. The KYC information on all end users should necessarily be collected (either directly or with the help of the third-party provider). The latter is operated by the Reserve Bank, and the access will be restricted only to approved participants. Private Ethereum (Quorum) will be used for arriving at common decisions and finding agreements on the major questions. Smart-contract (ERC-20) interfaces are likely to be used in this project.
The pilot CBDC will be officially called eAUD, and it will be denominated in Australian dollars. The total emission will be determined by the Reserve Bank based on the assessments made by use case providers. The project does not presuppose any interest being paid by the Reserve Bank to eAUD holders. In addition, all holders should complete the KYC identification by their respective provider. Both custodial and non-custodial realizations of eAUD will be offered, thus providing the maximum flexibility and functionality to participants.
ERC-20 provides the optimal functionality for fungible tokens issued on the Ethereum platform. In this manner, tokens can be effectively transferred from one account to another. Moreover, gas fees have considerably declined recently due to the worsening “crypto winter” conditions, thus enabling the implementation of this functionality with minimal cost for users. The holder may also be able to determine whether some tokens can be spent from a third-party account.
Complex holding structures will be introduced during the implementation of the CBDC initiative in Australia. The Reserve Bank will be directly liable to an eAUD end user. The private keys will also be fully controlled by the end user, thus providing the maximum access to their holdings. In addition, the Reserve Bank will also be directly liable to an end user with holdings on the CBDC ledger. In this case, the full control is exercised by a use case provider. Finally, the Reserve Bank will also be directly liable to a use case provider who holds an eAUD pool on behalf of ultimate users.
The highest privacy standards will be established. In particular, the Ethereum blockchain does not store end users’ KYC information that is accumulated exclusively by service and use case providers on different platforms. The following two privacy models will be implemented. The first one refers to a fully private one that provides visibility only to end users and use case providers of their balances and data. The second one refers to a semi-private option that enables use case providers to offer visibility to other users if it is desirable in a concrete case.
The Reserve Bank aims to effectively reduce the overall counterparty risk as well as enable atomic settlement of transactions that involve tokenized assets. Multi-party and syndicated transactions can be effectively implemented with the new enhanced functionality. Finally, 24/7 operations will allow to address the financial needs of the maximum number of users in the country. The consistent implementation of this initiative will make Australia one of the global leaders in the CBDC segment.