The Australia and New Zealand Bank (ANZ) is to pilot the use of a prototype central bank digital currency (CBDC) for offline transactions using pre-loaded contactless cards at RMIT University in the Australian city of Melbourne and Southern Cross University in New South Wales.
ANZ will test the CBDC for offline payments in one of 14 pilot projects to be launched by the Reserve Bank of Australia (RBA) and the Digital Finance Cooperative Research Centre (DFCRC) as part of their ongoing research into the development and issuance of an Australian CBDC that will also cover use cases including ecommerce, asset trading, corporate bond settlement, livestock auctioning and construction payments.
The ANZ university pilot aims to explore how a CBDC could “address situations where online connectivity is absent” such as major outages, communities that lack the means to connect online or those who are unbanked”, DFCRC explains.
“As part of the pilot, NFC-enabled smart cards pre-loaded with CBDC funds will be given to participating students.
“The aim is to demonstrate how an organisation like a university can step in and provide immediate financial support through the disbursement of CBDC in emergency situations, such as where students are unable to access funds online or traditional banking services.”
“The pilot will involve several steps. First, the universities will operate a secure smartphone app to view their CBDC balance. Using NFC functionality, specific amounts of CBDC will be loaded onto the smart cards,” DFCRC says.
“Second, the smart cards will be given to participating students, who will use them to make purchases at on-campus merchants, such as cafes, gyms and book shops.
“Third, merchants will have a secure smartphone app to accept the students’ card payments at point of sale, where CBDC payments will be transferred in an offline scenario. These consumer-to-merchant payments function as cash sales. Multiple offline transactions can occur to evaluate consecutive offline payments in the proposed solution.
“Finally, merchants will use their app to view the CBDC they have received and can select to redeem their CBDC balance into fiat currency, which will be transferred to their bank accounts.”
Other providers participating in the RBA and DFCRC pilots include Commonwealth Bank, Oban, Australian Bond Exchange, Canvas Digital, Intuit, digi.cash, Fame Capital, Imperium Markets, Mastercard, Cuscal, Monoova, NotCentralised and Unizon.
“We are delighted with the enthusiastic engagement by industry in this important research project. It has also been encouraging that the use case providers that have been invited to participate in the pilot span a wide range of entities in the Australian financial system, from smaller fintechs to large financial institutions,” RBA’s Brad Jones says.
“The pilot and broader research study that will be conducted in parallel will serve two ends — it will contribute to hands-on learning by industry, and it will add to policy makers’ understanding of how a CBDC could potentially benefit the Australian financial system and economy.”
“A report on the project is expected to be published around the middle of the year,” the RBA adds.
The RBA contributed to the Bank for International Settlements’ report on CBDCs in emerging markets in April 2022.