SYDNEY, Aug. 9 (Xinhua) -- Australia's central bank, the Reserve Bank of Australia (RBA), has embarked on a project to explore the potential uses for a federally backed digital currency.
The RBA announced on Tuesday that, in collaboration with the Digital Finance Cooperative Research Centre (DFCRC), it would run a year-long, limited-scale trial of a central bank digital currency (CBDC).
"The Bank and the DFCRC will select a range of different use cases to participate in the pilot, based on their potential to provide insights into the possible benefits of a CBDC," said the RBA.
Dr. Andreas Furche, CEO of the DFCRC, said the technology for a digital currency already existed and rather the project was about understanding how a CBDC could help Australia.
"The key research questions now are what economic benefits a CBDC could enable, and how it could be designed to maximize those benefits," he said.
Unlike traditional digital currencies such as Bitcoin and Ethereum, a CBDC would be stabilized and regulated by the government.
Mark Humphery-Jenner, associate professor of Finance at the University of New South Wales (UNSW), told Xinhua on Tuesday that a CBDC often proposes a variety of benefits from faster transactions, ease of government stimulus or monetary control, and smoother international transactions.
"CBDCs are in stark contrast to traditional cryptocurrency...a CBDC presumably has the government at the centre with the government having control over who can interact with the system, currency convertibility, and full visibility of who transacts with whom."
He said for instance it would allow the government to track how welfare money is spent, and could theoretically be used to track financial fraud.
Humphery-Jenner also said it could be an additional tool for banks to control spending, and in effect inflation in the economy.
"If the government decides to increase transaction times, it would deter some expenditures and could control inflation."
He said that the benefits of a digital currency for the individual remain "ephemeral".
"The RBA and the government will need to take steps to ensure this is not change for the sake of change, and to assuage fears that this is just about government control." ■