With growing popularity and increasing global interest, Australia is the latest country to tap into CBDCs. The country has announced that they have partnered with several banks to explore the idea of releasing a digital currency pegged to their Australian dollar. Discover what CBDCs are and how Australia is tapping into the future of money.

What are CBDCs?

CBDCs are Central Bank Digital Currencies that are virtual currencies pegged to the local fiat currency. Similar to stablecoins these cryptocurrencies will always remain the same price as the local fiat, for example Tether is pegged to the US dollar and will always be worth $1. Unlike cryptocurrencies, CBDCs are distributed and maintained by the bank or government agency in charge and run on a centralized model. Cryptocurrencies are typically run by a network of operators in a decentralized fashion.  

CBDCs give banks the opportunity to tap into the world of digital currencies, without the volatility and associated risks. Designed to complement local currencies as opposed to replacing them, CBDCs allow banks and users to make use of instant payments available around the clock, lower transaction fees and heightened monitoring of tax practices. 

Australia Enters The Arena

The European Union is considering a digitized Euro, the U.S. is presenting their CBDC strategy to the IMF, and China recently handed out 10 million digital yuan (about $1.5 million) in one of the first real-world trials of CBDCs. Following developments in other countries, Australia was keen to explore the concept. Rightly so. They recently brought together three major banks in the country, the Reserve Bank of Australia, the National Australia Bank, and the Commonwealth Bank, as well as Perpetual and ConsenSys Software. 

Looking to explore the innovation, risk management and efficiency of CBCDs, Australia is looking to transform the way that wholesale market transactions are conducted. The project is underway and set to be completed by the end of 2020, with the results being revealed in Q1 of 2021. From there, the team will decide whether to pursue the cause or not. 

Ethereum Provides The Framework

Australia will use an Ethereum-based platform as the blockchain provider, building their CBDC on the platform and making use of the many token standards offered. The CBDC will have funding, loan, and payment capabilities, and will represent a digitized form of the local (Australian) dollar. 

The assistant governor of the Reserve Bank of Australia, Michelle Bullock said in a statement: “While the case for the use of a CBDC in these markets remains an open question, we are pleased to be collaborating with industry partners to explore if there is a future role for a wholesale CBDC in the Australian payments system.”

The team behind the project is currently exploring different Ethereum platforms to find the right fit. With no intentions of writing off the fiat currency, the project leaders have assured the nation that fiat notes will be available for as long as they want them.

Australia Is The Latest Country To Tap Into CBDCs

With big developments in the digital space occurring around the world, it’s no surprise that more and more countries are looking to digitize their local currency. As cryptocurrencies continue to grow in value and adoption rates, it’s clear that they’re not going anywhere, and perhaps a digitized fiat is the best way for banks to keep up.