By Joni Pirovich, Special Counsel

Mills Oakley recently provided a submission to the Reserve Bank of Australia (Bank) in relation to its review of retail payments regulation. In the ever-evolving area of blockchain and digital assets, we welcome the opportunity to partake in the Bank’s information gathering and policy consultation around an Australian central bank digital currency (CBDC) – an eAUD. Such policy thought and leadership is vital for Australians and Australian businesses to best participate in an increasingly digital global economy.

Our submission:

• summarises the pros and cons surrounding the issuance of an electronic form of banknotes (i.e. an Australian CBDC for general household use);
• suggests an alternative, interim measure, that involves the Bank introducing a digital asset rating system; and
• emphasises the importance of the Bank’s participation in international forums that discuss the policy implications of CBDCs.

We have urged the Bank to commence trials as soon as possible regarding the issuance of an eAUD for household use and the hybrid applications of an eAUD for blockchain infrastructure (which may initially be targeted at wholesale investors but ultimately extend to retail use). Only with experimentation can the Bank understand, with confidence, the opportunity and challenges of an eAUD that are specific to the Australian financial system. Such an understanding would better allow the Bank to develop an Australian hybrid CBDC model that gives Australians and Australian businesses a choice to use an eAUD rather than other digital assets, and be best positioned to participate and take advantage of opportunities in the digital economy.

Clear evidence of demand from the public for an eAUD (or similar digital asset) may be an overnight occurrence rather than being signalled some time before such demand arises. In the likely event that the Bank and policymakers must act expeditiously, experience and insights from eAUD trials will be invaluable, particularly regarding an eAUD’s effectiveness in monetary policy, achieving/maintaining financial stability and in informing the role that commercial banks will play.

We look forward to discussing our submission and lending assistance to the Bank as the consultation progresses. You can view the submission in full here.

Please get in contact with Joni Pirovich on +61 3 8568 9629 or [email protected] to discuss your experience and insights regarding an eAUD or to discuss you blockchain, smart contracts and digital asset requirements.

For further information about our recent experience with Blockchain, Digital Assets & Smart Contracts, see our Capability Statement.