The Australian Competition & Consumer Commission (ACCC) is establishing a sandbox to help companies to develop and test solutions that seek to capitalise on the country’s Consumer Data Right (CDR): regulation introduced to give citizens greater control over their consumer data.
Sandboxes allow businesses to experiment with new services under regulatory supervision. They are becoming increasingly popular worldwide as national authorities look to encourage innovation and competition in financial services – for example, the development of fintech-enabled products by both established companies and start-ups.
Australia’s CDR legislation went live 18 months ago, signalling the first stage of open banking: the country’s four major banks – Commonwealth Bank, ANZ, National Australia Bank (NAB) and Westpac – were mandated to share access to consumer data for a range of personal accounts (with the customer’s permission). CDR was extended to further authorised deposit-taking institutions one year later (in July 2021) and is being extended to the energy sector.
The ACCC has various roles under CDR including accrediting what are known as data recipients, as well as monitoring compliance. The sandbox is being set up to help current and prospective CDR participants build and test their solutions.
“The CDR Sandbox is scheduled to be released in early 2022, initially supporting the banking and energy sectors,” an ACCC spokesperson told Global Government Fintech this week, adding that the sandbox would be “updated regularly in step with changes to the CDR rules and standards, including new sectors and functionality.”
‘Lower barrier’ for businesses to join CDR
Australia currently has a ‘mock’ register, ‘mock’ data holder and ‘mock’ data recipient CDR repository to help businesses to develop and test CDR-related solutions within their own IT environment. The sandbox will ‘build upon these tools by providing a hosted environment and self-service portal for businesses to test CDR solutions with other participants, as well as the mock tools’.
As the mock tools are publicly available under a free and open-source licence, the ACCC says that it has not tracked take-up among businesses. But the mock tools had been downloaded from GitHub more than 20,000 times (up to 2 December 2021 – the most recent date for which data is available), according to the spokesperson.
“To date, community engagement with the mock tools has been positive, with a number of code contributions, issue reports and feedback received from CDR participants and platform providers that have integrated the tools within their internal development workflows,” the spokesperson told Global Government Fintech.
The ACCC envisages the new sandbox being “broadly adopted” by CDR participants, enabling them to more easily respond to future changes that impact the CDR ecosystem, such as new rules and standards. It will enable common platforms to be tested against other participants’ systems prior to being rolled out across multiple clients.
“The CDR Sandbox has the potential to increase the quality of new and existing CDR participant solutions, and lower the barrier for businesses to join the CDR, by providing an environment to test innovative new concepts and validate technical solutions early on in the software development lifecycle,” said the ACCC spokesperson.
Australia’s government is currently considering feedback from consultation processes to inform the future expansion of CDR and deepening functionality. Beyond the energy sector, the telecommunications sector is next in line.
Central bank releases wholesale CBDC report
Separately, a report was published last month (December 2020) by the Reserve Bank of Australia (RBA), Commonwealth Bank, National Australia Bank, Perpetual and ConsenSys, with input from law firm King & Wood Mallesons, to mark the conclusion of ‘Project Atom’.
Project Atom was research undertaken during the past year that explored the potential use and implications of a wholesale form of central bank digital currency (CBDC) using distributed-ledger technology (DLT). The project involved the development of a proof-of-concept (POC) for the issuance of a tokenised form of CBDC that could be used by wholesale market participants for the funding, settlement and repayment of a tokenised syndicated loan on an Ethereum-based DLT platform. A syndicated loan is financing offered by a group of lenders (a syndicate) to a single borrower. Ethereum is an open-source, blockchain-based, decentralised software platform.
The project examined areas including how access to a CBDC could be extended to a wide range of wholesale market participants, including those that would not ordinarily have access to accounts at the central bank.
The 44-page ‘Project Atom: Exploring a Wholesale CBDC for Syndicated Lending’ report sets out how the digitisation of syndicated loans on a DLT platform could provide efficiency gains and reduce operational risk by replacing highly manual and paper-based processes. The POC also demonstrated that an enterprise-grade DLT platform with appropriate controls on access and security could address many of the potential requirements for a wholesale CBDC system and tokenised assets platform.
“Project Atom demonstrated the potential for a wholesale CBDC and asset tokenisation to improve efficiency, risk management and innovation in wholesale financial market transactions,” said the central bank’s assistant governor (financial system), Michele Bullock, adding that the RBA would continue its research on CBDCs “as part of its strategic focus area on supporting the evolution of payments.”
Global Government Fintech’s dedicated open banking / open finance section
‘Australia’s open banking regime enters next phase’ – our news story (14 July 2021) on new CDR legislation coming into effect extending the number of banks now expected to share basic consumer data
‘Open banking gets off to slow start in Australia’ – our news story (9 July 2020) on open banking becoming a reality after the CDR legislation went live