Australia, Singapore, Malaysia and South Africa have agreed to trial a low-fee cross-border stable digital currency to streamline direct financial transactions.
Although the proposed medium of exchange also called CBDC is a digital fiat currency and does not use a distributed ledger such as a blockchain, the concept itself is partially inspired by Bitcoin. China's digital RMB was the first digital currency to be issued by a major economy.
Project Dunbar will work with multiple partners to develop technical prototypes on different distributed ledger technology platforms. It will also explore different governance and operating designs that would enable central banks to share CBDC infrastructures, benefitting from the collaboration between public and private sector experts in different jurisdictions and areas of operation.
You can find the official release by the RBA here.
What is CBDC?
The "central bank digital currency" (CBDC), unlike Bitcoin, is a central bank-backed, officially recognised high-security digital instrument as a means of payment, a unit of account, and a store of value. And like paper currency, it is managed by central banks and each unit is uniquely identifiable to prevent counterfeit.
It is a digital bearer instrument that can be stored, transferred and transmitted by all kinds of digital payment systems and services. The validity of the digital fiat currency is independent of the digital payment systems storing and transferring the digital fiat currency.
Although the RBA is not a fan of cryptocurrencies, it has been exploring the viability of a low-fee easily-transferable digital currency over the past year.
Central banks don't see cryptocurrencies as a good currency. See here why and what makes a good currency.
The primary advantages of such digital fiat currencies are technological efficiency (eliminating intermediaries or clearing houses), real time digital proof or record of the transaction, protection of money as a public utility (modern fast-flying alternative to physical cash), interoperability (secure and standard cross-border transactions among participating countries), de-dollarization (USD is commonly used for cross-border transactions) and minimisations of security and stability concerns.
