The Reserve Bank of Australia (RBA) released a report on his two-year research project on wholesale central bank digital currencies (CBDC), highlighting the benefits of digitizing and empowering paper-based manual banking processes through Distributed Ledger Technology (DLT).
The report marks the conclusion of the two-year project called “Project Atom”, which was carried out in collaboration with the Commonwealth Bank of Australia (CBA), the National Australia Bank (NAB), Perpetual and ConsenSys, along with additional input from King & Wood Mallesons.
Commenting on Project Atom, RBA (Financial System) Deputy Governor Michele Bullock noted that it “demonstrated the potential of a wholesale CBDC and asset tokenization to improve efficiency, risk management and innovation. in wholesale financial market transactions “.
A wholesale CBDC refers to a digital currency issued by the central bank that is designed for the settlement of interbank transfers and transactions between financial institutions., unlike a retail CBDC, which is intended for public use.
The research on CBDC was released on December 8, the same day Deputy Liberal Leader and Treasurer Josh Frydenberg unveiled an ambitious “crypto and payments reform plan” for fintech and cryptocurrency regulation in Australia. . The government has indicated that it is in favor of at least six cryptocurrency reform proposals recommended by a Senate Committee, and is investigating others..
Too slow? We’re on a rocket ship ride. Hold on tight. https://t.co/meuqgKjp3h
– Steve Vallas (@stevevallas) December 8, 2021
Too slow? We are on a rocket trip. Hold on tight.
The project consisted of a proof of concept (POC) for the issuance of a “tokenized form of CBDC”, which could be used in a digitized wholesale syndicated loan market. The tests were conducted on an Ethereum-based Distributed Ledger Technology (DLT) platform.
The report concluded that a wholesale CBDC backed by DLT technology could significantly increase efficiency and reduce operational risk. by “replacing the highly manual and paper-based processes related to origination and servicing” of data, transactions, loan payments, and settlements, to name a few.
Nevertheless, Some issues the RBA highlighted related to “transaction privacy, purpose, performance and efficiency” of using CBDC and DLT, especially in relation to blockchains that are not designed for wholesale purposes.
The POC experimented with a two-tier model for the issuance and distribution of a CBDC, in which the RBA issued the digital currency to commercial banks and then banks opened availability to “eligible wholesale market participants who sponsor on the platform.”
The RBA said it has explored the concept of CBDC since 2018 – despite downplaying it multiple times – but has gradually increased its focus on a digital currency since 2020 amid growing interest from governments around the world., citing China in particular, which has already rolled out numerous public proofs of the digital yuan.
Bullock noted that the RBA “will continue its research on CBDCs as part of its strategic focus area to support the evolution of payments.”.
Speaking to the Australian Financial Review on December 8, Sophie Gilder, head of blockchain and digital assets at the CBA, emphasized the “high-level benefits” of using a CBDC, noting that an interoperable payment and registration system could provide greater transparency for payments, data and the auditory:
“I think of it as ‘operational alpha’: greater efficiency and greater transparency, which means you don’t have to separately audit and report on activities, and you can have better AML procedures. [contra el lavado de dinero] because you have real-time control. “
“That would be beneficial to the economy and facilitate the work of regulatorswhile the programmability would be a giant leap and very beneficial, “he added.
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