Australia moves forward on central bank digital currencies

Innovation has always been a critical part of banking. Think ATMs, internet banking and mobile wallets. All were ground-breaking when they emerged; now most of us can’t imagine life without them.

“We will bring our experience in traditional banking and payments – along with our emerging digital-asset services capabilities – to the pilot.”

At ANZ, our approach to digital assets and currencies is the same as our approach to internet banking 25 years ago: there is an opportunity ripe for the taking. The market will reward those who embrace the digital-asset economy.

That’s why ANZ is participating in the Reserve Bank of Australia’s collaborative research project on a central bank digital currency (CBDC) with the Digital Finance Cooperative Research Centre. The purpose of this pilot, announced last year, is to explore use cases for a CBDC in Australia and the potential economic benefits of introducing one.

ANZ is playing an important role in a number of areas in the pilot. The work our team has done leads the Australian market in this area. Nearly 12 months ago, ANZ issued A$DC, the first ever Australian bank-issued stablecoin – a digital currency with a value linked to the Australian Dollar.

This was the result of a significant amount of effort from our team, working closely with customers who were clear about their interest in and demand for this kind of service.

The next step

It was followed a few months later by the successful exchange of A$DC for tokenised carbon credits, or BCAU, by long-time ANZ customer Victor Smorgon Group. It served as the next step in ANZ’s digital-asset journey and we approached it as we would any other transaction – guided by our principle of ‘same activity, same risk, same regulation’.

This is something we take very seriously. As we explore this work we’re encouraged by the interest from our key regulators, including, but not limited to, the Australian Prudential Regulation Authority, the Australian Securities and Investments Commission and the Australian Transaction Reports and Analysis Centre.

The CBDC pilot is an exciting project to be part of and we’re approved to test three use cases of the technology.

As part of our involvement, we’re looking at unique case studies across super-fund payments, offline payments and the tokenisation of carbon credits.

Our first use case will explore how eAUD could be used to make instant payments in an offline environment not connected to existing banking infrastructure. We'll also work with selected superannuation customers to test how eAUD could help speed up contributions to a super account.

And finally, ANZ will use decentralised networks to test tokenised carbon-credit provenance and atomic settlement, as well as a range of other critically important information. We'll share more information on these use cases over time.

We’re also supporting the pilot by distributing CBDC to non-exchange settlement account holders. This means ANZ will distribute eAUD token to selected pilot participants on behalf of the RBA.

Lower costs

We will bring our experience in traditional banking and payments – along with our emerging digital-asset services capabilities – to the pilot.

ANZ has been exploring the digital asset and currency space for some time. We’re focussed on how we can leverage our in-house talent in combination with the knowledge of our partners to offer the best possible processes and technologies to the pilot program.

But we know customers want more. The A$DC is just the start for us. At ANZ, we believe this area represents significant potential customer benefits in the form of lower costs, reduced settlement times, more resilient infrastructure and lower counterparty risk.

We will continue to explore new ways for customers to transact through new financial-market infrastructure. We’re excited about the future and look forward to exploring the opportunity for our customers and the wider economy.

Nigel Dobson is Banking Services Lead at ANZ Institutional.

A version of this article was originally published in ANZ Institutional on March 2nd 2023.