CBA & NAB Partner RBA for Wholesale Distributed Ledger Technology
(03 November 2020 – Australia) CommBank and NAB have joined up with the Reserve Bank of Australia (RBA) and ConsenSys Software to develop a proof-of-concept (PoC) central bank digital currency (CBDC) for wholesale settlement.
The PoC will be developed by the end of Q4 2020 as part of a project to explore the potential use and implications of a wholesale form of CBDC using distributed ledger technology (DLT). Australia’s central bank has been investigating use cases for a CBDC for wholesale settlement for the last three years, as well as a CBDC for consumer use.
The RBA maintains there is no strong policy case to introduce a CBDC for retail use in Australia, despite COVID-19 driving a move away from cash, and instead focused its efforts on a wholesale digital currency.
The announcement preceded the Reserve Bank cutting the overnight cash rate to a record low of 0.1 percent in addition to purchasing A$100 billion in long-term bonds as it implements a quantitative easing (QE) program for the first time. Reserve Bank Governor Philip Lowe is seeking to spark the economic recovery with aggressive monetary policy to limit the fallout from rising unemployment on the back of unprecedented fiscal policy stimulus measures. Australia faces over two years of unemployment above six percent and stagnant wage growth of sub two percent.
“The project will involve the development of a PoC for the issuance of a tokenised form of CBDC that can be used by wholesale market participants for the funding, settlement and repayment of a tokenised syndicated loan on an Ethereum-based DLT platform. The PoC will be used to explore the implications of ‘atomic’ delivery-versus-payment settlement on a DLT platform as well as other potential programmability and automation features of tokenised CBDC and financial assets” the RBA released in a statement.
“While the case for the use of a CBDC in these markets remains an open question, we are pleased to be collaborating with industry partners to explore if there is a future role for a wholesale CBDC in the Australian payments system. The collaborative project aims to explore the implications of a CBDC for efficiency, risk management and innovation in wholesale financial market transactions” commented RBA Assistant Governor Michele Bullock.
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