In the previous post to this I outlined how the forthcoming Central bank arms race for the development of Central Bank Digital Currency would unfold. I did not however expect to find out so soon that the Reserve Bank of Australia (RBA) has been using a private version of the Ethereum blockchain to experiment with it's own settlement layer cryptotoken. THIS IS HUGE NEWS!
The paper by the RBA is set out here, but some highlights include the following:
'The Bank has closely monitored developments in cryptocurrencies, such as Bitcoin, over a number of years. These developments have the potential to affect the Bank’s mandates as the issuer of Australia’s banknotes, operator of Australia’s real-time gross settlement system, and its responsibilities for the stability of the financial system and the stability and efficiency of the payments system.'
'the G7 released a report on global stablecoins in which it recognised that they have the potential to be more efficient and inclusive than existing payment methods, particularly for cross-border payments.'
Ok...I have 'cherry picked' some of the more positive quotes. But the big deal is that even just one year ago the RBA and others were dismissing cryptocurrencies as nothing but scams...now they are afraid they could disrupt their control over money...and they want to develop their own...and they are using Ethereum (the native token of Ethereum being Ether...a cryptocurrency) to experiment with settlement layer payment systems.
They advised that :
'The Bank is not currently considering a CBDC for retail use, but notes the availability of a wholesale settlement token based on distributed ledger technology could allow payment and settlement processes to become more integrated with other business processes.' and that:
'One example of work in this area undertaken in the Bank’s Innovation Lab was the development of a proof-of-concept of a wholesale settlement system running on a private, permissioned Ethereum network. The proof-of-concept simulated the issuance of central bank-backed tokens to commercial banks in exchange for exchange settlement account balances, the exchange of these tokens among the commercial banks, and their eventual redemption with the central bank. The Bank intends to extend this research over the coming year, potentially through collaboration with one or more external partners.'