After a year of rigorous research, the Reserve Bank of Australia (RBA) and the Digital Finance Cooperative Research Centre (DFCRC) determined that an introduction of a central bank digital currency (CBDC) may not occur for several years in Australia. These results were coupled with the emergence of numerous unresolved issues – an abundance of uncertainties that might give some pause to the natural excitement of crypto enthusiasts.
While the excitement for new digital platforms is undeniable, the study was notably narrow in its scope. It did not intend to offer a comprehensive evaluation of the costs, potential upsides, risks, or broader implications of a CBDC. On the contrary, the primary goal was to investigate how a CBDC could be implemented to enhance the functionality of current payment systems.
Interestingly, the research posed the idea of a CBDC as an assistive complement, rather than a replacement for private sector innovation. The potential benefits of the CBDC system include supporting offline electronic payments, facilitating ‘smarter’ transactions, and reducing risk and costs. The tokenization of assets on DLT platforms also showcased several advantages.
At the same time, the report gave rise to a few raised brows regarding the possible introduction of stablecoins – privately issued and fully backed by CBDC. But these prospects were somewhat overshadowed by the research’s emphasis on the need for additional study due to a multitude of legal, regulatory, technical, and operational concerns.
Key management was among these complicated endeavors – finding affordable and sufficiently secure solutions for cryptographic key management proved to be a challenge especially for companies inexperienced in operating on other DLT networks.
Implementation of a CBDC platform didn’t escape these challenges either. The research shed light upon the difficulties of the integration process with industry use case applications – insights that questioned potential deployment models’ suitability.
Moreover, the research dived into the issues touching upon privacy and surveillance aspects of CBDCs. The unanswered query of privacy in Australia’s case highlighted the challenges posed by the conflicting needs of privacy and data sharing, as well as the complexity of the technology required to implement a single CBDC platform. These reservations warrant additional research and careful consideration.
Balancing on the edge of innovation, one cannot underestimate the potential for advancements as we strive to enhance our financial systems. But, as the Australian case shows, we owe it to ourselves to tread carefully, ensuring that we are ready to face these challenges as pragmatically as possible.