Australia's central bank has revealed that it will defer any decision regarding a central bank digital currency (CBDC) for the foreseeable future due to lingering unresolved matters stemming from a recently concluded pilot project.

According to the released report, the decision on a CBDC implementation within Australia is not imminent due to a multitude of outstanding issues.

The study proposes that viewing a CBDC as a supplementary tool to private sector innovation, rather than a substitute, could be more appropriate

The report conveys that the comprehensive evaluation of the costs, benefits, risks, and other implications of introducing a CBDC was beyond the scope of this initiative.

Instead, the focus was squarely on investigating how a CBDC could be harnessed by the industry to enhance the efficiency of the payments system.

The findings suggest that an Australian CBDC could facilitate offline electronic payments and enable more sophisticated transactions that are both cost-effective and less precarious.

Benefits of an Australian CBDC?

The research underscores the advantages of tokenising assets on distributed ledger technology (DLT) platforms. The report also highlights the potential for privately issued stablecoins that have a full backing of CBDC.

However, the research report emphasises the need for further exploration, primarily due to an array of challenges encompassing legal, regulatory, technical, and operational domains.

The Reserve Bank of Australia (RBA) and the Digital Finance Cooperative Research Centre (DFCRC) embarked on this research venture last year, aiming to explore the possibilities associated with asset digitisation and the utilisation of CBDCs.

The pilot CBDC platform necessitated cryptographic keys for executing actions.

Yet, securing affordable and adequately robust solutions for key management emerged as a hurdle, especially for entities lacking experience with other DLT networks.

Integration of a CBDC platform with various industry use case applications also posed difficulties, thus casting implications on potential deployment models.

What is a CBDC?

A CBDC is a digital form of a country's national currency that is issued and regulated by the central bank.

Unlike traditional physical banknotes and coins, CBDC exists purely in digital form and is often built upon blockchain or other distributed ledger technologies.

It represents a government-backed and controlled digital version of the national currency, allowing for electronic transactions and payments while maintaining the central bank's oversight over the currency's issuance and circulation.

CBDCs can serve as an alternative to physical cash and digital payment systems, aiming to enhance the efficiency, security, and inclusivity of the financial system.

Coinlive previously reported on how a South Korean Bank is collaborating with the country's central bank, the Bank of Korea (BOK) for a CBDC pilot.