The project will involve the development of a limited-scale CBDC pilot that will operate in a ring-fenced environment for a period of time and is intended to involve a digital currency that is a real claim on the Reserve Bank.

Interested industry participants will be invited to develop specific use cases that demonstrate how a CBDC could be used to provide innovative and value-added payment and settlement services to households and businesses.

Michele Bullock, deputy governor of the Reserve Bank, says: "This project is an important next step in our research on CBDC. We are looking forward to engaging with a wide range of industry participants to better understand the potential benefits a CBDC could bring to Australia."

While the Reserve Bank has been actively working on the prospect for inroducing a CBDC in the wholesale markets, scepticism has been expressed about the need for a retail equivalent.

"Considerable research has been undertaken by central banks, including the Reserve Bank, into the feasibility and possible technical design of CBDC, in particular exploring the potential use of new technologies such as distributed ledger technology," the central bank acknowledges. "A question that has received less attention to date, especially in countries like Australia that already have relatively modern and well-functioning payment and settlement systems, is the use cases for a CBDC and the potential economic benefits of introducing one."

The Bank says the project will also be an opportunity to further understanding of some of the technological, legal and regulatory considerations associated with a CBDC.