RBA Shifts Focus, Drops Retail CBDC, Prioritises Wholesale in New Roadmap

In a speech delivered yesterday to the Intersekt Fintech Conference in Melbourne, the Reserve Bank of Australia’s (RBA) Assistant Governor, Brad Jones, said the bank has shelved plans for a retail central bank digital currency (CBDC) and is instead focussing on pursuing a wholesale CBDC. 

Jones explained the shift in focus to a wholesale CBDC comes after the RBA’s internal research found that a retail CBDC would offer little in the way of benefits to the Australian economy relative to the costs of such a system. In contrast, Jones said a wholesale CBDC would likely provide considerable benefits to Australia’s banking system without the pitfalls of a retail CBDC.

Related: Reserve Bank of Australia and Mastercard Announce Successful CBDC Test

No Public Policy Case for Retail CBDC, Says Jones

Jones outlined the RBA’s three-year roadmap, which has a particular focus on updating Australia’s wholesale banking system:

I can confirm that the RBA is making a strategic commitment to prioritise its work agenda on wholesale digital money and infrastructure – including wholesale CBDC – rather than retail CBDC.

Brad Jones, RBA Assistant Governor

According to Jones, the decision to focus on a wholesale CBDC rather than retail comes down to the relative benefits and costs of each system. He said the numerous benefits to Australia’s baking systems of a wholesale CBDC include:

• Reducing counterparty and operational risks;
• Increasing informational transparency; and
• Improving liquidity and reducing compliance costs. 

The benefits of a retail CBDC by contrast are currently “modest and uncertain” explained Jones, and wouldn’t necessarily have much impact on Australia’s economy. He argued a retail CBDC could also introduce significant risks to the economy including higher borrowing costs, higher likelihood of bank runs, and more complicated implementation of appropriate monetary policy. 

Australians are generally well served by a safe, efficient and innovative retail payments system. Given the potential benefits of a retail CBDC in Australia appear modest at the present time, and a retail CBDC would create non-trivial challenges for financial stability and monetary policy implementation, we are yet to see a strong public policy case emerge for issuing a retail CBDC.

Brad Jones, RBA Assistant Governor

RBA’s Eyes Tokensied Markets with Wholesale CBDC

Jones said the RBA’s most pressing priority at the moment is implementing the public phase of Project Acacia, which is focussed on identifying “opportunities to uplift the efficiency, transparency and resilience of wholesale markets through tokenised money and new settlement infrastructure.” This will build on the central bank’s CBDC pilot programs run last year. 

The implementation of Project Acacia will be the first step in the bank’s three-year digital money roadmap, as it aims to assess how a wholesale CBDC could support tokenised markets in Australia. By the end of this three-year roadmap, the RBA hopes to have established academic and industry advisory groups, introduced a CBDC regulatory sandbox, and conducted widespread public engagement on the future of digital money in Australia.

Related: New Zealand Reserve Bank Suggests Potential CBDC Launch by 2030

According to the Atlantic Council’s CBDC tracker, every country in the G20 is currently exploring a CBDC, with 19 of them — including Australia — in an advanced phase of exploration. As of September 2024, only three countries have actually launched a CBDC: The Bahamas, Jamaica and Nigeria.