SYDNEY: The Reserve Bank of Australia (RBA), the country's central bank, said on Tuesday that it would conduct a year-long, small-scale trial of a central bank digital currency in conjunction with the Digital Finance Cooperative Research Centre.
According to their ability to provide light on the potential advantages of a CBDC, the Bank and the DFCRC will choose a variety of distinct use cases to take part in the pilot, the RBA said.
The technology for a digital currency already exists, saide Dr. Andreas Furche, CEO of the DFCRC. The project is instead focused on figuring out how a CBDC may benefit Australia.
What economic benefits a CBDC would provide and how it might be built to optimise those benefits, he said, are the current main research questions. A CBDC, in contrast to conventional digital currencies like Bitcoin and Ethereum, would be stabilised and governed by the state. A CBDC frequently suggests a number of benefits from quicker transactions, ease of governmental stimulus or monetary regulation, and smoother international transactions, according to Mark Humphery-Jenner, associate professor of finance at the University of New South Wales.
"CBDCs are in sharp contrast to cryptocurrencies... a CBDC presumably has the government at its core, with the government having control over who is able to interact with the system, currency convertibility, and complete visibility of who transacts with whom."
He explained that, for example, it would enable the government to monitor the expenditure of welfare funds and, in theory, could be used to detect financial wrongdoing. Humphery-Jenner added that it might be a further instrument for banks to manage consumer spending and, consequently, inflation.
If the government decides to lengthen transaction times, it might discourage some spending and keep inflation under control. He claimed that a digital currency's advantages for a person are still "ephemeral." To allay concerns that this is merely about government control and to guarantee that this is not change for the sake of change, the RBA and the government will need to take action.
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