A report on the project is expected to be published around the middle of the year.

The white paper includes the design of the pilot CBDC that will be utilised by industry participants to explore use cases for a CBDC.

The announcement of the project was made in August 2022.

As a first step in a reform agenda, the Treasury will prioritise 'token mapping' work in 2022, which will help to identify how cryptoassets and related services should be regulated.

The aim of the reforms will be to "identify notable gaps in the regulatory framework, progress work on a licensing framework, review innovative organisational structures, look at custody obligations for third-party custodians of cryptoassets and provide additional consumer safeguards."

ASIC said it will take action to protect investors from harms posed by cryptoassets that fall within its remit and that it is "committed to using the full range of our powers to preserve the integrity of the Australian financial markets."

The actions ASIC will take include:

• supporting the development of an effective regulatory framework focused on consumer protection and market integrity, following the recent consultation by Treasury;
• taking enforcement action to protect consumers from harms associated with cryptoassets, including those that mimic traditional products but seek to circumvent regulation;
• supervising and assessing Product Disclosure Statements and target market determinations of major crypto offerings within its jurisdiction;
• implementing and monitoring the regulatory model for exchange traded products with underlying crypto investments;
• raising public awareness of the risks inherent in cryptoassets and DeFi;
• working with domestic and international peers to monitor risks, develop coordinated responses to issues and develop international policy regarding cryptoassets and DeFi.

Its latest research report 'Retail investor research (REP 735)' shows 44% of people surveyed hold cryptocurrencies, making it the second most common product type held after Australian shares at 73%. A quarter of surveyed investors who held cryptocurrency indicated that cryptocurrency was the only investment they held.

Commenting on the findings, ASIC Chair Joe Longo said: "We are concerned about the number of people surveyed who reported investing in unregulated, volatile cryptoasset products. This research does highlight during this particular point in time, the appeal of cryptoassets to the market. According to the survey, only 20% of cryptocurrency owners considered their investment approach to be ‘risk-taking’, raising concerns that investors did not understand the risks of this asset class.’

‘ASIC is also concerned that there are limited protections for cryptoasset investments given they have become increasingly mainstream and are heavily advertised and promoted. There is a strong case for regulation of cryptoassets to better protect investors."

The project, which is expected to take about a year to complete, 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 pilot CBDC 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. 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.

A report on the findings from the project, including an assessment of the various use cases developed, will be published at the end. The findings will contribute to ongoing research into the desirability and feasibility of a CBDC in Australia.

The Australian Treasury is participating as a member of the steering committee for the project, as part of its joint work with the Reserve Bank on exploring the viability of a CBDC in Australia.

A paper will be published in the next few months that will explain the objectives and approach of the project in more detail and how industry participants will be able to engage.