The Reserve Bank of Australia (RBA) recently announced its intention to implement a digital currency to “complement existing forms of money.” The RBA currently issues physical money in the form of paper notes and digital money in the form of electronic balances that are held in commercial banking accounts. A Central Bank Digital Currency (CBDC) would represent a new way for retail or otherwise general purpose transactions to be conducted in the market.
At minimum, the Central Bank Digital Currency would need to be useable in-person for use as a face-to-face payment option. Were it to totally replace traditional cash and coinage, it would need to be useable in much the same way credit and debit cards are used. Contentiously, the level of anonymity and privacy debated by central banks would preclude it from being used in a relatively discrete way like contemporary cash and coins are. For example, there may be a requirement for an associated account and identity verification process in order to possess CBDC.
The main issue the RBA is addressing by discussing the retail usage of CBDC is the decline in the use of cash. As such a large portion of the nation relies almost exclusively upon various digital or card based transactions, the usage of cash has declined substantially. This represents an area where the RBA could save money by no longer circulating physical currency.
Another argument presented by the RBA is that as central banks issue default-free and free-to-use forms of money for household usage, this capability should be merely transferred to the growing space of digital currency.
Digital currency, far from being a passing fad, has swiftly established itself in the marketplace. Whether the RBA intends to make good on its current preliminary research into digital currency and subsequently adopt it remains to be seen. Would your business benefit from a widespread adoption of CBDC?