4 October 2022

The Reserve Bank of Australia (RBA) and the Digital Finance Cooperative Research Centre (DFCRC) have released a white paper selecting the Quorum Blockchain Platform in its pilot into a possible Australian Central Bank Digital Currency (CBDC). Three years ago the Qoin Project, one of Australia’s largest digital currency projects, also selected Quorum as technology platform to build and innovate its blockchain and wallet integrations. Since then tens of thousands of Australian merchants and consumers have been registered and transacted on the platform.

In its white paper released last week, the RBA said, “the project intends to test a general-purpose pilot CBDC issued as a liability of the RBA for use in real-world, pilot implementations of services offered by Australian industry participants.”

The purpose of the CBDC pilot project outlined in the paper is to explore innovative use cases and business models that the issuance of a CBDC could support. The report added, “any compelling use case – whether so-called ‘wholesale’ or ‘retail’ – will be explored in the project”. It is a prerequisite for participation in the pilot that use cases comply with all relevant laws and that appropriate parties hold all necessary licences and permits.

The pilot CBDC project has a domestic focus on participants and use cases. It will be called the eAUD and denominated in Australian dollars, with the smallest amount totalling one cent. The eAUD will not exist beyond the conclusion of the pilot project.

In early August, the RBA first announced its plans with the government-backed industry group, DFCRC, to identify instances and business models that could be backed by a CBDC and better understand its operational requirements. In addition, the RBA and DFCRC are engaged with regulators, such as ASIC and AUSTRAC, to work through regulatory implications as they arise.

The DFCRC is a 10-year, $180 million program funded by industry partners, universities and the Australian Government to examine emerging digital assets to develop and harness the opportunities arising from the next transformation of financial markets – the digitisation of assets that can be traded and exchanged directly and in real-time on digital platforms. The white paper is part of the RBA’s and DFCRC’s ongoing research pilot project to identify a use case for a CBDC in Australia.

The Qoin project has a lot in common with the eAUD pilot. It will also operate on a private and permissioned Ethereum (Quorum), which is a well-understood platform. Like Qoin, it will also be using JSON-RPC APIs and smart contract (ERC-20) widely used interface functions, including:
• Transfer tokens from one account to another.
• Get the current token balance of an account.
• Get the total supply of the token available on the network.
• Approve whether a third-party account can spend a token amount from an account.

The eAUD project offers an opportunity to experiment and test new business models for current and emerging markets on a platform designed for innovation. The eAUD ledger will also operate as a centralised platform. The RBA will mint and issue the new eAUD as well as manage and oversee this ledger.

Use case providers will interface with the eAUD platform to transfer pilot CBDC or invoke smart contracts. In addition, they will need to conduct an identity validation (KYC) of all their end users (or utilise an approved KYC service provider to do so).

Central banks globally are actively exploring the potential role, benefits, risks, and other implications of CBDC.

The industry expressions of interest deadline closes end of October, with selected use cases for pilot CBDC by December 2022. The CBDC pilot will be shut down by April 2023 and findings released “around the middle of 2023”.