A Central Bank Digital Currency (CBDC) pilot program in Australia has received more than 140 use case proposals from the finance industry, but the Reserve Bank of Australia (RBA) warns that it could displace the Australian dollar and result in people avoiding commercial banks entirely.

The RBA released a speech on Dec. 8 to be given by Assistant Governor Brad Jones at a central bank conference held from Dec. 8 to Dec. 9 local time, in which Jones speaks at length about what effect a CBDC could have on the Australian economy.

Jones notes that the RBA has been surprised by the industry interest they have received since releasing a white paper on Aug. 9, with over 80 financial entities proposing use-cases covering many areas such as e-commerce, offline, and government payments.

The team working on the pilot “eAUD” program is working out which of the proposed use-cases to take into its pilot phase early next year, and is expecting to publish a report on the project around the middle of 2023.

Jones also discusses the potential risks that are associated with an Australian CBDC, and points to liquidity issues and other issues the banks could face if a CBDC becomes the preferred source of holdings.

For example, with deposits of Australian residents such as savings accounts now making up over 60% of total funding for their banks, enough Australians choosing a CBDC over the Australian dollar could result in banks not having sufficient capital to lend to consumers, which in turn would make it harder for the RBA to transmit monetary policy, he said.

Jones also notes that Australians preferring to hold their funds in a “risk-free'' CBDC could lead to bank runs, with Australians withdrawing deposits en masse.

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