The RBA’s daring crypto experiment
The RBA has revealed that it has simulated using central bank-backed digital tokens in the wholesale payments system as Facebook’s cryptocurrency plans flounder.
Facebook’s cryptocurrency may have hit a regulatory brick wall, and central bankers are still far from convinced that cryptocurrencies such as bitcoin offer any benefits over traditional money.
But the Reserve Bank of Australia has revealed that it is conducting ground-breaking trials to test whether central bank-issued digital currencies can play a useful role in the payment settlement system.
In its submission to the Senate Select Committee on Financial Technology, released this week, the Reserve Bank disclosed that it has run a simulation of a wholesale settlement system – where financial institutions such as banks settle customer payments between themselves – would operate, running on a private, permissioned Ethereum network.
(Ethereum is a global computer network with its own software which can be programmed to complete certain computer tasks, with every computer on the network completing the task in tandem. Ethereum has its own virtual currency, called Ether, which is a popular competitor to bitcoin.)
The Reserve Bank simulated what would happen if central bank-backed tokens were issued to commercial banks in exchange for their exchange settlement account balances.
The banks could then exchange these tokens among themselves to settle obligations, and could eventually redeem them with the central bank.
To read more, please click on the link below…