According to Cointelegraph, the Bank of Canada is winding down its work on retail central bank digital currency (CBDC) and shifting its focus to broader payments system research and policy development. The central bank's website update emphasized that while research on retail CBDC is being scaled down, work on wholesale CBDC continues.

The Bank of Canada has conducted extensive research on CBDC, but it is now prioritizing other pressing issues. The bank had previously maintained that a contingency plan for CBDC was necessary in case it became essential. However, with other payment issues gaining prominence, the bank is reallocating its resources.

Payments Canada, the association responsible for the country's payment clearing and settlement system, continues to develop the Real-time Rail instant payment system. This association includes over 100 members, such as the Bank of Canada. Additionally, the Bank of Canada is preparing to enhance its supervision of retail payments under the Retail Payment Activities Act of 2021. This act requires the central bank to begin registering 2,500 small payment service providers in November and enforce operational risk standards by 2025.

The Bank of Canada has collaborated with the Bank for International Settlements and the Massachusetts Institute of Technology Media Labs’ Digital Currency Initiative in its CBDC research. Despite the shift in focus, the bank acknowledges that its research will be invaluable if Canadians, through their elected representatives, decide they want or need a digital Canadian dollar in the future.

As most countries double down efforts to implement central bank digital currency (CBDC),  Australia has taken a separate route to attain economic prosperity. At the  Intersekt Fintech Conference, where top-tier investors converged to share business insight on financial technology, the Australian financial regulators unveiled a three-year research plan for developing the wholesale CBDC dubbed ‘Project Acacia.’

The plan, co-authored by the Reserve Bank of Australia (RBA) and Treasury, demonstrated that the government has reversed its decision to create retail CBDC. Instead, the Australian authority will invest in developing wholesale digital currency to tap into unrealized economic opportunities in the region.

Australia Launches 3-Year Wholesale CBDC Roadmap

A statement from the financial system assistant governor at RBA, Brad Jones, confirmed that the country’s apex bank would align its work plan to develop infrastructures that support the launching of wholesale CBDC. 

The decision to shift its focus to wholesale CBDC emanated from an intensive assessment conducted by the RBA and the Treasury to examine how the development of the digital dollar will impact the  Australian economy. 

From the analysis, the financial regulators noted that wholesale CBDC offered unmatched economic opportunities compared to retail digital currency. Jones explained that retail CBDC aims to streamline consumers’ day-to-day activities while the wholesale digital dollar provides cutting-edge solutions to banks and financial providers. 

The executive noted that the issuance of wholesale CBDC could drive decisive action for reforming Australian monetary policy to revive financial innovation. 

Australia Bets Big on Wholesale CBDC: Here is Why?

Also, Jone projects implementing wholesale CBDC would positively impact the financial sector by reducing risks and operation-related costs. Citing data from the Australian Bureau of Statistics, the financial regulators noted the country’s economy maintained a modest increase of 0.2% in Q2 of 2024. 

Therefore, the Aussie financial watchdogs agreed to redirect their attention to implementing wholesale CBDC to create a sustainable economy. They envisioned that wholesale digital dollars would support innovation and promote business agility.

Conversely, the regulators profiled retail CBDC as an unsuitable financial option to meet the country’s current economic needs. The RBA observed that retail CBDC might impact bank runs since it encourages high borrowing and spending. 

However, if Australia attains sustainable economic growth, the regulators might reconsider developing the retail CBDC to cope with the changes in financial dynamics. The assistant governor noted that if new legislation is passed authorizing the issuance of retail CBDC, the lawmakers will be mandated to amend the existing financial law. 

Ranking among the world’s largest economies, the financial regulators remain optimistic about issuing retail digital dollars in the future to maintain financial stability and inclusivity. Therefore, if Australia strengthens its economic pinnacle, the RBA will develop and issue a follow-up report on retail CBDC by 2027.

Is CBDC  the Future of Money?

In the meantime, the RBA and the Treasury will be committed to implementing  Project Acacia to maintain the national currency’s stability amid global currency shifts. The project seeks to integrate blockchain technologies into the traditional financial sector to tokenize bank deposits. 

The development will support the creation of an open, programmable, and effective payment infrastructure for global markets. At the primary stage of Project Acacia, the RBA will collaborate with other central banks to support the use of wholesale CBDC in cross-border transactions. 

The deputy governor believes that Project Acacia will foster economic growth in the region. However, to attain Project Acacia’s goal of transforming the future of central bank-backed coins, the RBA plans to consult the public and extensively research asset tokenization. 

Having a thriving economy, Australia seeks to retain its competitiveness in the global economy by introducing digital currency. A recent report for BIS shows that Australia is part of  94% of central banks working on developing the CBDC.

The statistics show that most 134 countries working on implementing digital currency prefer the wholesale version of the CBDC. To stay updated with ongoing developments in CBDC, follow  The Bitjounal.

The Bank of Canada is winding down its work on retail central bank digital currency (CBDC), according to an update to the central bank’s website. The announcement did not mention wholesale CBDC, but it emphasized that its research was continuing.

The Bank of Canada has done extensive research on CBDC and is now shifting its focus from CBDC research to other more pressing issues. 

The Bank of Canada has better things to do?

The Bank of Canada’s position on CBDC was that it needed a “contingency plan” in case it became necessary. The current shift in focus comes as the bank prepares for new responsibilities. The Bank of Canada said:

“With other payments issues gaining prominence, the Bank is scaling down its work on a retail central bank digital currency and shifting its focus to broader payments system research and policy development.”

Notably, Payments Canada, the association that operates the country’s payment clearing and settlement system, is continuing to develop the retail-oriented Real-time Rail instant payment system. The association has over 100 members, including the Bank of Canada.

In addition, the Bank of Canada is about to step up supervision of retail payments under the Retail Payment Activities Act of 2021. The act mandates that the central bank begin registering 2,500 small payment service providers that previously were only subject to Anti-Money Laundering provisions in November and enforcing operational risk standards in 2025.

The Bank of Canada reads its own reports

The Bank of Canada has engaged in CBDC research in conjunction with the Bank for International Settlements and the Massachusetts Institute of Technology Media Labs’ Digital Currency Initiative.

Source: Canada Proud

The bank’s own research ranged from high-level to street-level. The bank found repeatedly that the Canadian public had little interest in a CBDC and the new form of money would have new drawbacks for the financial system and the public.

Despite its changing priorities, the bank said its CBDC research “will be invaluable if, at some point in the future, Canadians, through their elected representatives, decide they want or need a digital Canadian dollar.”

Magazine: Your guide to crypto in Toronto: Crypto City

 

According to BlockBeats, on September 19, Decrypt reported that the Bank of Canada has officially shelved its central bank digital currency (CBDC) project, known as the 'digital Canadian dollar,' ending nearly five years of research. The Bank of Canada began public research on CBDCs in 2019 and conducted public consultations in 2022.In early 2024, the Bank of Canada released a research report indicating that as the use of cash continues to decline, the introduction of a CBDC could help Canada maintain monetary sovereignty and financial stability.

Bank of Canada Pauses Plans for Central Bank Digital Currency (CBDC) The Bank of Canada has announced that it is pausing its plans to develop a central bank digital currency (CBDC) for the time being. The bank had been exploring the possibility of issuing a CBDC since 2016, but has now decided to take a step back and re-evaluate the project. The decision to pause the CBDC project was made after the bank conducted a comprehensive review of the project's progress. The review found that the project was not yet ready to move to the next stage of development. The bank also cited the need to focus on other priorities, such as the COVID-19 pandemic and the economic recovery. The Bank of Canada emphasized that the decision to pause the CBDC project does not mean that it has abandoned the idea of issuing a CBDC in the future. The bank said that it will continue to monitor developments in the CBDC space and will be ready to resume the project when the time is right. The Bank of Canada's decision to pause its CBDC plans is a setback for the global effort to develop CBDCs. However, it is important to note that the bank is not the only one to have taken this step. The European Central Bank and the Bank of England have also paused their CBDC projects. The decision to pause CBDC projects is a reminder that the development of CBDCs is a complex and challenging undertaking. There are still many unanswered questions about how CBDCs will work and how they will impact the financial system. It is important for central banks to take the time to get these questions right before issuing CBDCs.

Coinspeaker Bank of Canada Drops Central Bank Digital Currency (CBDC) Plans

As per the latest development, the Bank of Canada is reportedly shifting away from pursuing its central bank digital currency (CBDC). It seems that the central bank is willing to drop the project seven years after it first started exploring the idea with the goal of digitalization of payments.

A report from CBC News suggests that the Bank of Canada seems less inclined to pursue the so-called digital Loonie. So far, the Canadian Central Bank hasn’t made any official announcement of pausing its research efforts towards the CBDC.

However, in a commentary to CBC News, a Bank of Canada spokesperson stated that the bank has undertaken “significant research on the implications of a retail central bank digital currency”. The report also states that the central bank has moved its efforts towards analyzing payment system trends both in Canada and globally.

This move follows data from the Atlantic Council think tank, showing that 134 countries, representing 98% of the global economy, are exploring digital currencies, with 44 actively piloting central bank digital currencies.

In a similar development this week, the Australian Central Bank dropped the idea of pursuing a retail CBDC and instead decided to focus on a wholesale CBDC. It noted that the retail CBDC presents “non-trivial challenges” for financial stability and monetary policy implementation. On the other hand, it believes that a wholesale CBDC “would represent more an evolution than a revolution in our monetary arrangements”.

Global Push for CBDC

The recent decision from the Bank of Canada comes at a time when countries across the world have been actively pursuing their respective CBDC projects.

Nearly 65 countries, including some of the top emerging economies including India, Australia, and Brazil, are in the advanced phases of a CBDC exploration. Their respective projects are either in the pilot stages or launch stages.

Last month in August, Canadian Conservative Leader Pierre Poilievre made a strong opposition to the development of central bank digital currency (CBDC) in the country while pledging to protect cash usage and reject the government’s push toward economic digitization.

He also voiced his support for Canadian Member of Parliament Ted Falk’s Bill C-400, which aims to prohibit the implementation of such a currency.

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Bank of Canada Drops Central Bank Digital Currency (CBDC) Plans

The Central Bank of Nigeria (CBN) has pledged more measures to jumpstart the low adoption of its digital currency, the eNaira.

The move comes after Zimbabwe recently ordered that all government services to be paid in the local ZiG currency, part of new measures to boost demand for the nation’s gold-backed currency, with over 500 traders and individuals fined for refusing to accept the ZiG.

REGULATION | #Zimbabwe Government Services and Some Taxes to be Paid in Local ZiG Currency Instead of Dollars, Orders Finance Minister

A crackdown, led by the central bank’s financial intelligence unit and police, to defend the ZiG from speculation on the parallel market, has… pic.twitter.com/uhHERL81ku

— BitKE (@BitcoinKE) July 29, 2024

According to the Monetary, Credit, Foreign Trade, and Exchange Policy Guidelines for the Fiscal Years 2024-2025 published by CBN on September 17 2024, the apex bank intends to enable payments into government accounts and allow Ministries, Departments, and Agencies (MDAs) to process vendor and beneficiary payments using the eNaira.

 

“The CBN shall continue to work towards enabling the use of eNaira Wallet/Channels by payers to pay into government accounts at the CBN, and allow Ministries, Departments, and Agencies (MDAs) to initiate vendor/beneficiary payments from their respective eNaira Wallets,” reads the document.

 

The digital currency has struggled to find traction since its launch in October 2021 despite different activities to promote and inculcate its usage.

Less than 0.5% of Nigerians are Using the eNaira One Year Later

Reports from the ceremony also indicate that 700,000 transactions worth $18.3 million had been made on the eNaira’s platform in the first year.https://t.co/g6zmUZU1Yt

— BitKE (@BitcoinKE) October 27, 2022

According to the quarterly statistical bulletin for the first quarter of 2024, eNaira accounted for  N13.98 billion out of the N3.87 trillion in currency circulation by March 2024, approximately 0.36% of the total currency in circulation within the country in Q1 2024.

Additional measures to boost adoption and use for the eNaira includes partnering with federal and state governments to boost adoption and the launch of eNaira version 2.0, which aims to increase the involvement of deposit money banks in its use.

[WATCH] The Central Bank of Nigeria Expands eNaira Use with ARGO Wallet Targeting 5 Million Farmers By 2024

There has been a notable increase in the activity of the Nigeria Central Bank Digital Currency (CBDC) in recent times. In March 2023, there was a 63% year-on-year surge…

— BitKE (@BitcoinKE) May 11, 2023

Planned features also include offline functionality and programmable money, which will integrate the eNaira into both online and offline government operations.

 

“The CBN issues and regulates the eNaira, a digital form of the fiat currency. The eNaira offers several benefits which includes faster and cheaper payments, increased financial inclusion, and reduced fraud, amongst others. 

“The CBN shall sustain efforts in enhancing the eNaira and driving its adoption. This includes the deployment of eNaira version 2.0 with focus on wholesale Central Bank Digital Currency (CBDC) to increase the participation of deposit money banks and empower them to drive its adoption; implementation of offline functionality, programmable money; and more collaboration with Federal and State Governments to increase its adoption.” 

 

Last year [2023], the International Monetary Fund (IMF), deemed the progress of the eNaira adoption as relatively low, recommending the bank to consider utilizing government aid programs, merchant payment systems, and more favorable foreign exchange (FX) rates for remittances to incentivize broader adoption of the eNaira.

IMF Advises Nigeria to Consider Mobile Money Integration to Boost Slow eNaira Adoption

The @IMFNews has expressed disappointment over the relatively low adoption of Nigeria’s CBDC, the #eNaira, more than a year since launch.https://t.co/pfEh3yKmMh pic.twitter.com/UIhRYNqQHt

— BitKE (@BitcoinKE) June 29, 2023

 

 

 

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The Reserve Bank of Australia (RBA) plans to prioritize developing wholesale central bank digital currency (CBDC) over the retail version. RBA Assistant Governor Brad Jones disclosed this during a speech at the Intersekt Conference on September 18, noting that the top bank has launched a three-year plan called Project Acacia to realize its goals.

According to Jones, the RBA is focusing on wholesale CBDC because its research shows that retail CBDC does not offer many benefits for the Australian economy and will be challenging to implement compared to retail. In his speech, he highlighted the several arguments for creating retail CBDC, noting that such issues are irrelevant to Australia.

He said:

“Our assessment is that the potential benefits of a retail CBDC generally appear modest or uncertain at the present time, relative to the challenges it would introduce. Most of the arguments made internationally in support of a retail CBDC reflect issues that are either of limited relevance to Australia, or where it is not obvious that a retail CBDC would best address them.”

Some issues highlighted include monetary resilience, cost and efficiency, financial inclusion, and monetary sovereignty. Jones claims that these do not have much impact on Australia as the country’s current financial system already offers sufficient solutions to cover them. However, he added that the RBA and Treasury will still reassess the need for retail CBDC and plan to release a follow-up paper by 2027.

Wholesale CBDC to benefit central and commercial banks

Meanwhile, Jones said wholesale CBDCs will offer several benefits to the central bank and commercial banks, making it the preferred option for the RBA to pursue now with the launch of Project Acacia.

He said:

“I can confirm that the RBA is making a strategic commitment to prioritize its work agenda on wholesale digital money and infrastructure – including wholesale CBDC – rather than retail CBDC.”

Some of the benefits he identified include reducing counterparty and operational risks, improving capital efficiency, increasing transparency, high liquidity, improved transactability, and reducing compliance costs and the number of intermediaries.

Although the plan is still very much in the research and exploratory stage, it is clear that the RBA plan focuses on tokenization, both real-world assets and cash. Jones noted that central banks already have experience issuing digital money to financial institutions, making the introduction of wholesale CBDC a mere improvement on existing practices rather than a complete sector revolution.

Project Acacia to launch public phase

With RBA now focused on wholesale CBDC, Jones has announced that the public phase of Project Acacia is the immediate priority as the RBA seeks to build on its earlier CBDC pilot project. Beyond that, the project will also consider the cross-border application of the CBDC with other regional central banks.

He said:

“Project Acacia aims to build on the lessons from our CBDC pilot last year by focusing on opportunities to uplift the efficiency, transparency and resilience of wholesale markets through tokenized money and new settlement infrastructure.”

Meanwhile, RBA plans to start advisory forums on CBDC comprised of industry stakeholders and academics in 2025, noting that it has had engagements with them but wants to formalize the structure for future discussions on monetary policy issues. However, 2025 will also see reforms to the existing regulatory sandbox for financial innovation, enabling new businesses to test out their financial products and services more effectively.

The RBA is not working alone on the three-year CBDC plan; it is partnering with the Treasury to actualize its goals.

The majority of Europeans and Americans are still reluctant to use CBDCs (central bank digital currencies), according to a survey by Deutsche Bank, Germany's largest commercial bank. The survey was conducted in March among 4850 people in Europe, the UK, and the US. It found that the majority of respondents prefer to use credit cards and debit cards rather than CBDCs for their financial transactions. When asked if they would rather use cash than CBDCs, 44% of respondents said yes. Additionally, only 16% of respondents believe that CBDCs will become the mainstream form of currency in the future. This suggests that there is still a lot of uncertainty and skepticism about CBDCs among the general public.

According to BlockBeats, a survey conducted by Deutsche Bank in March this year involving 4,850 consumers from Europe, the United Kingdom, and the United States reveals that cash is not likely to disappear soon. The majority of respondents indicated a preference for using debit or credit cards over Central Bank Digital Currencies (CBDCs). Specifically, 44% of those surveyed expressed a preference for cash over CBDCs.Only 16% of respondents believe that CBDCs will become mainstream. Additionally, 31% of participants stated they prefer using cryptocurrencies managed by central banks or governments, while just 21% indicated a preference for private cryptocurrencies like Bitcoin (BTC).

The Reserve Bank of Australia (RBA) has announced that it will prioritize exploring the use cases for a wholesale central bank digital currency (CBDC), according to a report by Swati Pandey for Bloomberg. While the idea of a retail CBDC has been widely discussed globally, the RBA’s Assistant Governor Brad Jones emphasized that such a move could present significant challenges to financial stability and monetary policy. He stated that retail CBDCs would introduce complex issues that may outweigh potential benefits.

As per Bloomberg’s coverage, the RBA’s immediate priority involves launching a new initiative with industry partners to explore the use of wholesale CBDCs and tokenized commercial bank deposits. Jones indicated that this move toward a wholesale variant would represent an evolution of Australia’s current monetary framework rather than a radical shift. He noted that this project is particularly important as central banks worldwide are exploring blockchain technology to improve the speed and cost of interbank payments.

Bloomberg cited data from the Atlantic Council highlighting that 134 countries and currency unions, collectively representing 98% of global GDP, are currently investigating the development of CBDCs, with three nations having fully launched such systems. Despite the global trend, critics caution that CBDCs could raise privacy concerns due to the potential for transaction monitoring, Bloomberg noted.

In his speech, Jones clarified that should a public policy case for a retail CBDC emerge, the Australian government would have the final say, and legislative changes would likely be required. Meanwhile, the decision-making process for a wholesale CBDC would vary depending on the specifics of the arrangement. Jones also outlined a three-year roadmap for digital money development, which per the Bloomberg report, includes evaluating the potential benefits and design challenges of a retail CBDC starting in 2026.

Furthermore, Bloomberg pointed out that local institutions like ANZ Group Holdings Ltd. and Commonwealth Bank of Australia Ltd. have already participated in pilot projects to explore the feasibility of a CBDC. As Jones laid out, the RBA and the Australian government plan to publish a joint paper later this week, offering further insights into the future of digital currency in the country.

Featured Image via Pixabay

Australia’s approach to Central Bank Digital Currencies (CBDCs) has changed course. Rather than the development and testing of retail CBDCs in an effort to promote them to the public, the country has actively taken up the use of wholesale CBDCs. 

This decision is in line with the purpose of implementing CBDCs to improve the existing financial system mainly in executing the high value, cross border and institutional financial services. 

CBDC: From Retail to Wholesale 

This shift changes the earlier discourse that considered the question of retail CBDCs for consumer use. It’s significant to mention that we are talking about the wholesale CBDCs, which are planning to be the product targeted mostly to the financial institutions while the retail CBDCs will be offered to the public as a new form of money similar to cash. Focusing on wholesale uses, Australia is to bring the necessary advances to the financial infrastructure and enhance the context of transactions between institutions. 

This particular model of CBDC enables higher degrees of automation, transparency, and security for a relatively larger number of bulk transactions between several parties at once, making it all the more suitable for real-time settlements in buildings complex financial networks. 

Wholesale CBDC: Potential Benefits for Financial Institutions 

Oversights of CBDCs can enable faster payment and decrease risks of settlement while enhancing the process of clearing. The Reserve Bank of Australia (RBA) has named this as one of the critical issues that need to be enhanced in the country’s monetary structure. This is because by creating a full-fledged CBDC, Australia would potentially eliminate many operational costs and increase the speed and efficiency of cross- border transactions which currently is still inefficiency and slow under the current processes. 

Further, the country plans to advance the financial market to rely on CBDCs in wholesale segments as it would help institutional investors and central banks provide faster and more secure settlements.

Comparison with Retail CBDC Approach 

The use of retail CBDCs would benefit consumers to directly hold digital money issued by the central bank but it also brings privacy, preparedness of the existing infrastructures, and disruption of the existing banking structures into contemplation. A retail CBDC could also alter the course of monetary policy and commercial banks for example, since citizens could decide to hold funds in the CB directly. 

In this regard, while wholesale CBDCs entail the above-discussed pros, they also mitigate the above-discussed risks since they do not engage directly with the public. This makes them more appropriate for the Australian market where the establishment of banking facilities is well advanced and customers’ exposure to banking services is already high. 

Enhancing the Role of Australia in the Emergent CBDC Environment 

Focusing on the development of a wholesale CBDC, Australia is set for its institutional digital currency leadership. Other countries such as China, the US and the EU also are considering the wholesale CBDCs to adopt the new financial structure. However, Australia’s emphasis on the wholesale use case is in line with the country’s objective to develop its financial markets that do not necessarily involve the consumer-oriented digital currencies. 

Taking into account the conservative but progressive position, Australia will occupy a strategic position in the formation of the outlook for the transition of the global financial environment for digital currencies. Transition from retail to wholesale CBDCs is viewed as the next stage of the development of digital financial assets that can open promising prospects in the enhancement of the stability and speed of settlements in fast-value transactions.

The Reserve Bank of Australia will launch a 3-year program on the future of digital money.

The RBA and Treasury will release a joint paper on central bank digital currency (CBDC). 

The research program will focus on wholesale CBDC and tokenized commercial bank deposits.

The Reserve Bank of Australia (RBA) has proposed to launch a three-year applied research program on the future of digital money in the country. On Wednesday, Brad Jones, the Assistant Governor of the bank, made the statement at the Intersekt Conference in Melbourne. Further, he added that with the support from the Payment System Board, the agenda on wholesale money and infrastructure is prioritized. This includes wholesale central bank digital currency (CBDC) rather than retail CBDC.

According to an official statement released by the bank, Jones asserted that wholesale CBDC is less challenging than retail CBDC. In turn, this enhances monetary arrangements and benefits the economy better. Additionally, this will stabilize the bank’s role in the settlement of wholesale market transactions. Jones stated that three forms of money exist in the country. They are physical cash, exchange settlement balances, and commercial bank deposits. Of the three, the last two are digital. Although digital money is dominant in the country, the CBDC has more weight in terms of privacy, safety, and freedom.

Jones asserted that the research program ‘Project Acacia’ will focus on various elements. However, its primary aim is to explore wholesale CBDC and tokenized commercial bank deposits. The project will help to understand new ledger arrangements and concepts in tokenized markets. This will further benefit the Australian financial system and promote a wider economy. 

In the case of a retail CBDC, there are fewer benefits. The Assistant Governor stated that the wholesale CBDC is fundamentally different from retail. He added that the wholesale CBDC could be issued to financial institutions like exchange settlement balances. This will make the wholesale CBDC a safe asset in the settlement of wholesale market transactions. Jones committed that if a public policy arose to issue a retail CBDC, then the government might take the decision after consulting with RBA and Treasury. 

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