CBDCs aren’t about solving today’s problems — Australia’s CBDC lead

Dilip Rao, formerly associated with Ripple and currently spearheading Australia’s central bank digital currency (CBDC) pilot, has undertaken a comprehensive analysis of 14 potential applications for CBDCs. 

As part of his role, Rao has delved into various use cases that could revolutionize the financial landscape. This initiative is crucial as countries worldwide explore the possibilities of digital currencies issued and controlled by central banks. With his expertise and experience, Rao’s exploration of these potential applications promises to pave the way for the future of digital currencies and their integration into everyday transactions, offering immense potential for transforming the global financial ecosystem.

Dilip Rao, the prominent figure leading Australia’s CBDC research project, has expressed a bold perspective on the potential of central bank digital currencies (CBDCs). According to Rao, while CBDCs may not offer immediate solutions to the challenges we face today, they hold the key to addressing problems that we have not even envisioned yet. 

As a former Ripple executive, Rao brings a wealth of experience and knowledge to the table, allowing him to assert that a central bank-issued digital currency can be designed to cater to unforeseen use cases. Rao’s forward-thinking approach highlights the transformative power of CBDCs, suggesting that they possess the capacity to tackle future financial obstacles and provide innovative solutions that surpass our current understanding.

Dilip Rao, who currently holds the position of research program director at the Digital Finance Cooperative Research Centre, is actively engaged in a collaborative effort with the Reserve Bank of Australia to delve into the potential applications of a central bank digital currency (CBDC). While this research initiative progresses, Rao candidly acknowledges that the crucial question of why individuals would be compelled to utilize a CBDC is still unanswered. However, Rao proposes a plausible future scenario wherein large institutions engage in trading tokenized assets on marketplaces. 

In such a context, these institutions may find CBDCs preferable as they offer a means to mitigate risks associated with the transactions. This insight highlights one potential use case that underscores the significance of CBDCs in addressing the needs and requirements of specific sectors within the financial ecosystem.

Dilip Rao, in his capacity as research program director at the Digital Finance Cooperative Research Centre, is actively collaborating with the Reserve Bank of Australia to explore potential use cases for a central bank digital currency (CBDC). While this ongoing research progresses, Rao acknowledges that the fundamental question of why individuals would choose or require a CBDC remains unanswered. 

However, Rao suggests that in the future, one possible use case could involve large institutions trading tokenized assets on marketplaces, as they may find CBDCs preferable due to their ability to mitigate risks. It is worth noting that Australia’s CBDC pilot is currently investigating 14 potential use cases, and the forthcoming report on these tests will help narrow down which ones warrant further exploration. Rao emphasizes that a CBDC is not necessary for every use case, and for widespread adoption, people must perceive the value it offers. This insight underscores the importance of demonstrating tangible benefits and value propositions to encourage the broad acceptance of CBDCs.

In Australia, one significant obstacle to implementing a central bank digital currency (CBDC) would be the necessary legislative changes that require public support. Dilip Rao acknowledges that for these changes to successfully pass through Parliament, politicians must be convinced and obtain broad public backing. This would necessitate extensive public consultation to address the concerns and preferences of the people. 

According to Rao, the focus of such consultation would be on identifying and resolving the specific problems that individuals want to be solved. He highlights that politicians are unlikely to take actions that could potentially result in losing votes, emphasizing the importance of addressing public concerns and gaining their trust. Rao stresses the need for a thorough process that involves technology advancements and legislation to ensure that the public feels comfortable and confident with the proposed CBDC implementation.