Canberra, Aug 9 (IANS): The Reserve Bank of Australia (RBA) on announced that it has embarked on a project to explore the potential uses for a federally backed digital currency.

The RBA said that, in collaboration with the Digital Finance Cooperative Research Centre (DFCRC), it would run a year-long, limited-scale trial of a central bank digital currency (CBDC), reports Xinhua news agency.

"The Bank and the DFCRC will select a range of different use cases to participate in the pilot, based on their potential to provide insights into the possible benefits of a CBDC," said the RBA.

Andreas Furche, CEO of the DFCRC, said the technology for a digital currency already existed and rather the project was about understanding how a CBDC could help Australia.

"The key research questions now are what economic benefits a CBDC could enable, and how it could be designed to maximize those benefits," he said.

Unlike traditional digital currencies such as Bitcoin and Ethereum, a CBDC would be stabilized and regulated by the government.