Australia Launches Phase Two of Project Acacia for Digital Currency Testing

The Reserve Bank of Australia (RBA) has launched the second phase of Project Acacia, a significant initiative aimed at testing the practical applications of stablecoins and central bank digital currencies (CBDCs) in real-world scenarios. This phase is a critical step in Australia's journey towards integrating digital currencies into its financial system, with a particular focus on wholesale finance. The project seeks to enhance transaction efficiency, reduce settlement risks, and increase transparency through the use of blockchain and distributed ledger technology (DLT).

Phase Two of Project Acacia will evaluate the use of digital currencies in various areas, including trading tokenized assets, cross-border payments, and instant settlement systems. The RBA's decision to prioritize wholesale CBDC over retail CBDC is based on extensive research indicating that a retail version would not deliver significant innovation for public use. In contrast, a wholesale CBDC offers numerous advantages, such as reducing counterparty risks, enhancing liquidity, increasing transparency, and potentially lowering operational and compliance costs for commercial and central banks.

To facilitate this experimental phase, the Australian Securities and Investments Commission (ASIC) has granted temporary regulatory exemptions to participating entities. This move allows financial institutions and fintech firms to test new uses for digital assets that do not currently fit within the existing legal and regulatory framework. Major players participating in the pilot program include Commonwealth Bank, Westpac, and ANZ, among others. These institutions will focus on specific use cases relevant to their expertise, such as the repo market, tokenized trade payables, and real-time settlement in the fixed-income market.

The trial involves testing 24 different scenarios, with 19 based on real financial transactions and five structured as virtual simulations. These scenarios span various sectors, including fixed income, private markets, carbon credits, trade receivables, and new applications for accounts at the RBA. The project is part of the Australian government's broader push to regulate the crypto space more effectively, with a focus on increasing consumer protection and promoting financial stability. The findings from Project Acacia are expected to be published in the first quarter of 2026, providing valuable insights into the potential of digital currencies and tokenization in the financial industry.

This initiative comes amid a global trend of stablecoin adoption and increasing recognition by central banks and regulators of the benefits of digital currencies. The RBA's commitment to exploring the potential of CBDCs and their integration into the financial system is a significant step forward in Australia's digital finance journey. The project represents a crucial milestone in the country's efforts to leverage technology for enhancing the efficiency, security, and transparency of its financial systems.