Aug 24, 2023

Australia won't be introducing a CBDC for some years, according to a new report from the country's central bank.

Video transcript

We're gonna go down under to Australia where uh the nation has decided that it won't be introducing a CBD C for some years. And they say likely according to a new report from the country's central bank and another public and private institution that was created to do a research project around C BT C usage. Joining us now to discuss this is the CEO and co-founder of Fintech company Canvas, David Lecky, welcome David. Thank you for having me. Yeah, thanks for staying on. Uh I know it's late in Australia. Uh very quickly, we just want to understand, you know, how close were you to this entire process of the uh one year through this CBD C research and, and how close the industry was. Uh you know, how much Levi did the RB, the Bank of Australia actually give the industry in participating. Uh We were very close and we were involved throughout the entire project from the moment it was, it was announced by the Digital Finance Research Center until its successful conclusion this week. So to give some background, just this week, the project wrapped up and it was a joint partnership between the Reserve Bank of Australia and the Digital Finance Research Center. And it was a unique pilot in that the eaud that was used within the project was real money. It was an actual claim on the central bank. If you look at other CBD C pilots that have taken place around the world, they typically have taken uh have used test net and hasn't been real money. But the project in Australia was real money and they had participants such as the major banks, Mastercard and ourselves that were showing various use cases. Our use case was for foreign currency exchange on our layer two network that showed the conversion of eaud to U DC. And we did that on our privacy focus Blockchain called canvass connect. And unlike tornado cash that was mentioned earlier in the call, uh we were providing a secure environment that had delivered privacy but not anonymity. And so there was a lot that came out of the project, both for the government and ourselves. A lot of learnings that have come out, but it's really shown that there is a path forward tokens, the economy and having a uh ecosystem of both CBD CS and privately issued stable coins. Can you tell us about some of those learnings? You know, the Reserve Bank of Australia says that there are still quite a bit of issues and challenges to be resolved. What did you experience in terms of challenges? Um and learnings here as it pertains to the project that you were testing out. Sure. So a couple of the themes that came out of the project and I detailed in the report was that CBD CS and tokenization creates more capabilities around smarter payments. And so when you're using a digital currency, it allows for atomic settlement and it allows for money to move a lot quicker. And so also looking across asset markets, they can be made a lot more efficient and a lot more lower cost by using a CBD C and by tokens assets. And that really this whole movement towards CBD C and tokenization, stable coins and digital currencies can promote innovation competition and a lot more inclusion in the digital economy. And that's one of the goals of the Reserve Bank of Australia is to promote competition and to make an efficient and uh open payments network as part of what is their Emmit. And so a lot of these things have come out of the project and are detailed in the report. Uh There were some interesting areas particularly around legal and regulatory concerns that this is completely breaking new ground. Uh Because these are, if you think about this is the same digital dollar or the same uh traditional dollar just wrapped in a new form factor. And some of the laws that govern financial products and currencies were written 50 100 years ago. And so really to now take that into a digital age is a big, big leap. And so there was a lot of work that had to be done between, uh, the government, between the research center, between ourselves and the regulators to ensure that everything was done in a legal and regulatory friendly way. Yeah. And, and that's quite unique. Uh, but just, let's just zoom out a little bit, 100 and 30 countries in the world exploring CPD CS more than 60 in advanced stages. And Australia is an advanced economy. As we know, it's uh you know, it's, it's a major economy in a way. Uh Is this a win for the CBD C or crypto industry or a loss that Australia has said? Well, no CBD C for the near future because that's not clear in what, what, what, what we're talking about right now and the fact that they have pushed it back for several years, they think potentially uh is, is, is a bit weird because there are other countries that are going ahead with it. Well, the goal of the project was to explore the benefits and what are the associated issues it was entered into as a pilot and to understand more about the benefits of CBD CS in Australia and in a global broader context. Now, in Australia, we have very highly efficient payment mechanisms where you can send money from one person to another domestically instantly. And for basically no cost. And so to look at what are the benefits and why do you really need to have a CBD C is a fundamental question to answer. Now, when you look at international movements and cross border, there's a clear case for a CBD C. Uh And there's other cases particularly moving between bank issued tokenized deposits and stable coins. But I wouldn't say I, I'd very much say this is a win because when you look at on a global basis, as you've said, uh many countries, many reserve banks around the world are looking at this as a form of digital currency and a form to evolve economies. But there's a lot that needs to come out of it for a CBD C to exist legislation that needs to happen. So that's a longer road than a bank that's issuing a stable coin or a technology company that's issuing a stable coin. So this is all part of a movement towards a digital economy. And so we, I see it as a win, we can see it as a win. Sorry, I agree. I mean, thank you for a clear answer that you see it as a win. But I just want to push back on that a little bit. It's, it's kind of tricky to say that it's a win when this report actually doesn't say how this research is going to continue. And in what form in which new project is, is gonna be 2.0 or not, it just see says for the next unforeseeable future they're not gonna be any CBD C. How, how is that a win? Yeah. So there is discussion in the report and there are other ongoing engagements with the Treasury Department of Australia about creating a framework for digital currents, digital assets, stable coins, a range of other mechanisms. And so CBD C is just one part of a movement towards a tokenized economy and there's a lot of other streams that are executing successfully. So I don't think CBD C is the be all and end all. And the project was very successful and the report comes and says there's a lot more to learn legislation still needs to happen. The, the uh Digital Finance Research Center was funded for the to the tune of $150 million which is a long term to look at various other use cases. So this is just one step on a journey to really evolve financial markets with both domestically and to work internationally as other markets are evolved into a global tokenized economy. All right, David, just a quick question. Before we go, we got to wrap it up in just about a minute. Um You mentioned regulatory uncertainty is part of the reason why CBD C might um take a little while to get implemented in Australia in the US. Regulatory uncertainty is kind of causing a brain drain, causing companies to go and set up shop in places where there is more regulatory clarity like Europe are you experiencing that in Australia as well? Well, we were really pleased to work very closely with the regulators to understand what are the issues and where are the gaps within the current regulatory frameworks and see what needs to evolve? And so we're having close discussions with regulators in Australia and it's expected that the new legislation will come into force in the near future that will create more certainty. But if you look on a global basis with the like of Singapore, issuing a framework for digital uh stable coin issuers. And in Europe, with my, there's a lot more of these regulatory regimes which are appearing and I think you'll see that uh accelerate and really come to the fore over the coming years now that the technologies are maturing and now that the reserve banks are starting to understand what are the benefits and what are the actual use cases and who are the participants in the market? All right, David, thank you so much for joining the show. So late in the evening, we appreciate you happy to be here. Always. Thank you. That was the CEO and co-founder of Canvas. David Lecky.

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