The Reserve Bank of Australia (RBA) has started “Project Acacia” to develop a wholesale central bank digital currency (CBDC). This project will test 19 pilot programs using real money and assets, along with five proof-of-concept trials involving simulated transactions. These trials will look at different asset types like fixed income, private markets, trade receivables, and carbon credits. They will use CBDCs, stablecoins, bank deposit tokens, and creative applications of commercial bank deposits for settlements. The testing will take place over the next six months, using platforms like Hedera, Redbelly, R3 Corda, and Canvas Connect, with a final report expected in early 2026.

Project Acacia Use Cases

The chosen use cases aim to see how digital money from central banks and private entities, along with payment systems, can improve Australia’s wholesale financial markets. The RBA is focusing on wholesale applications and believes a retail digital currency may offer limited benefits. Expected advantages include reduced risks, increased transparency, better collateral efficiency, and lower costs. The RBA’s recent actions indicate a careful move towards changing how high-value financial transactions are settled and tracked in the institutional sector. By conducting live-money trials, they’re moving past mere academic exercises—this is real testing that could transform the traditional systems used by traders and clearers. These tests will cover a wide range, from fixed-income transactions to more unique holdings like carbon credits, making it possible to uncover practical issues early on. What’s particularly interesting is the mix of settlement methods. This includes creating digital assets that resemble traditional bank deposits, which are usually isolated in older systems. With the integration of blockchain technologies like Hedera and R3 Corda, the time it takes to settle transactions could shift from hours or days to just minutes. This change is not only about speed—it also impacts financing costs and limits on large positions. With real money involved in many of these pilots, we should gain valuable insights into potential pain points. The potential effects on pricing are evident. As the systems supporting transaction flows become more efficient, the spreads on various wholesale products could narrow. Margin requirements may change, and old assumptions about delivery risks and payment delays will need to be re-evaluated. When intermediaries like custodians or clearinghouses operate alongside a central bank-issued token, the time frames that have long defined specific trades could become much shorter. This change directly affects capital that is currently tied up under stress-testing models.

Institutional Market Bias

It’s important to note that the project’s focus on institutional markets suggests skepticism toward consumer-held digital currencies. By excluding retail applications, the central bank leans towards systems that keep most participants within a closely monitored environment. This decision emphasizes utility and system integrity over widespread adoption, making the findings more relevant for those involved in trading risks and managing capital. From a trading standpoint, we should pay attention to how tokenized forms of existing value—like bank deposits or collateral—function on these experimental systems. For those managing exposure or adjusting funding strategies over the next 3 to 12 months, we may see shifts in what is deemed acceptable settlement collateral. In this environment, it may be necessary to reassess liquidity assumptions across different instruments. Importantly, the handling of atomic settlement in a wholesale digital money setting can significantly alter cash needs for derivatives with tighter timing requirements. We expect market discussions to heighten around two key moments. First, if certain trials prove more efficient than traditional methods, and second, if clearing times for synthetic trades (like swap legs and repo terms) under a digital settlement model do not meet expectations. In both scenarios, we could anticipate volatility shifts during roll cycles or expiry dates. Execution teams should observe how the trials manage unusual situations—such as censorship risks or significant operational downtimes—not because they are likely, but because redesigning systems can lead to new failure risks. Finally, if commercial institutions can create private tokens that function like government-backed money, this introduces uncertainty. If these national bank deposits start to circulate like stablecoins but have different risk factors, regulatory interpretations could instantly change demand for these instruments. This shift could transform how spreads or curve positioning behave, prompting market makers to adjust their hedging ratios to fit new execution standards. Risk teams should begin analyzing these instruments under basic stress scenarios now to avoid being surprised if regulations take longer to clarify than market adoption. Create your live VT Markets account and start trading now.

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