Australian CBDC can be useful for payments and tokenization

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The RBA has completed its CBDC pilot program and outlined four key areas that could be improved with the introduction of central bank-issued digital currency.

Australia’s central bank has completed its pilot project for a central bank digital currency (CBDC) exploring use cases for a potential e-AUD and finding it useful in four key areas, including enabling complex payments and tokenizing assets.

The Reserve Bank of Australia (RBA) and the Digital Finance Cooperative Research Center (DFCRC) published their findings in an August 23 report that also details a number of cases where a CBDC was not only required to achieve the indicated use case.

The pilot found four key areas that a CBDC could improve, including enabling “smarter” payments, where a tokenized CBDC enabled a variety of complex payment arrangements that are currently not supported by existing payment systems.

Furthermore, the report details that a CBDC can support innovation in financial markets such as bond markets, foster innovation in emerging private digital currency sectors, and increase resilience and inclusion in the broader digital economy.

The CBDC pilot program was structured as an actual legal claim on the RBA rather than a proof of concept, which caused uncertainty about its legal status and regulatory treatment among participants.

“Some participants were unsure if they were providing custodial services or trading a regulated financial product by holding or trading the pilot CBDC,” the report said. “Ideally these issues should be anticipated and resolved in any legal and regulatory reform that accompanies the issuance of a CBDC.”

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