The Reserve Bank of Australia has released a report on CBDC use cases

On August 23, the Reserve Bank of Australia (RBA) and the Digital Finance Collaborative Research Center (DFCRC) released their findings in a report detailing the implications of a central bank digital currency (CBDC).

Notably, this investigation included the RBA releasing a pilot CBDC to selected industry participants in a secure environment, marking a departure from previous theoretical experiments. This CBDC was not just a concept, but a legitimate requirement for a central bank to dive deep into the legal, regulatory, technical, and operational aspects of issuing a CBDC, thereby guiding future policy decisions.

The report features a wealth of submissions from industry players, each presenting unique use cases for CBDC that can deliver significant benefits to Australian households and businesses.

Among the key topics that were covered in the submissions was the potential of CBDC to streamline payments. The report states that programmable, tokenized CBDCs can facilitate complex payment mechanisms that conventional systems struggle to support. For example, the use of smart contracts can trigger automatic payments using CBDC whenever predetermined conditions are met. This would eliminate costly reconciliation processes and reduce the risk of failed trades.

Moreover, the study highlighted the potential of CBDCs to spur innovation in financial and other markets. Industry representatives have expressed significant interest in using distributed ledger technology (DLT) platforms to tokenize assets, with a pilot CBDC being used for "atomic" transaction settlement. This research has extended to traditional debt markets, which typically have settlement times measured in days, to less liquid assets such as Australian carbon credits and NSW biodiversity credits.

The CBDC can also spur innovation in private digital money by promoting new forms of interoperable, unified private digital money such as tokenized bank deposits and high-quality asset-backed stablecoins. CBDCs could become an alternative to central bank settlement balances used in commercial bank transactions, facilitating competition in the digital money market.

Finally, the findings suggest that CBDCs can increase resilience and inclusion in the digital economy. Some submissions indicated that CBDCs could improve system reliability by offering alternative payment methods such as offline electronic payments, especially during power or internet outages. Such a feature can be especially useful for specific segments of the population who may have difficulty accessing traditional banking services, including travelers, international students, and victims of domestic violence.

The project has identified an increased interest from the industry in the development of tokenized asset markets, facilitated by CBDC, which can serve as a catalyst for private sector innovation, including the development of new forms of private payment instruments and infrastructure.

However, the study of the CBDC also raised many questions, highlighting the need for further understanding of a number of legal, regulatory, technical and operational issues. For example, the project demonstrated the need for a deeper analysis of the legal basis for a CBDC, including the legal basis for its issuance and legal status. In addition, the project identified potential issues related to the technical design of CBDCs and their integration with use case applications.