Australia Announces Central Bank Digital Currency and Australian Dollar Project

Australia took a step closer on Wednesday to the potential establishment of a central bank digital currency (CBDC), as the Reserve Bank of Australia (RBA) announced an upcoming pilot phase for its digital Australian dollar currency called eAUD.

In a joint announcement with the Australian Research Centre for Digital Finance, the RBA stated that it has invited a small number of companies to assist in exploring 14 use cases for eAUD, seeking participation from companies such as ANZ and Mastercard in the program. The use cases range from facilitating offline payments to tokenized accounts for businesses, and even livestock auctions.

– The pilot and broader research study that will be conducted in parallel will serve two purposes, contributing to practical learning and enhancing policymakers’ understanding of how CBDC could potentially benefit the Australian financial system and economy – said RBA Assistant Governor Brad Jones.

Another company involved in the announcement was Canvas Digital, a layer 2 blockchain built on top of Ethereum that uses zk technology to facilitate transactions. The network was built in collaboration with StarkWare, and by utilizing Circle’s USDC stablecoin and eAUD, Canvas has been invited to pilot the settlement of foreign exchange transactions.

Zero-knowledge rollups or zk-rollups are methods for increasing the efficiency of the underlying blockchain, in this case, Ethereum, reducing settlement times and transaction costs by processing transactions on a separate blockchain. The technology uses zero-knowledge proofs, a concept in cryptography that allows for the verification of transactions without revealing the details associated with them. This enables financial institutions to maintain a level of privacy in transactions.

Co-founder and President of StarkWare Eli Ben-Sasson stated that testing the use cases mentioned in the RBA announcement could demonstrate that new digital currencies are not just a passing fad and that they have functions that fit into people’s everyday lives.

– Just a few years ago, the idea of rollups was very theoretical, and now they play a role in such projects. These are exciting times – said Ben-Sasson.

More than 10 countries have launched CBDCs so far, and 89 countries are either piloting, developing, or researching CBDCs, according to the website of the American Atlantic Council. Japan announced last month the launch of a CBDC pilot program in April.

In the U.S., the Federal Reserve has been exploring the concept of issuing its own tokenized dollar for years, publishing research on the topic as early as 2016. The Fed San Francisco recently posted job ads related to CBDC development, seeking individuals who could assist in designing and developing a digital version of the U.S. dollar.

However, not every lawmaker is on the same page. Republican Majority Representative in the House Tom Emmer reintroduced legislation last month that would prohibit the Federal Reserve from issuing a CBDC, which he argued would result in the deprivation of Americans’ rights to financial privacy.