July 21, 2024
RBA's vision for a Tokenized Future in Australia's Financial System.
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Reserve Bank of Australia Positions CBDC as the Future of Currency

The Reserve Bank of Australia (RBA) has expressed its readiness to embrace a central bank digital currency (CBDC) as the future of currency, where state-issued digital money would symbolize a tokenized version of central bank reserves.

In a presentation titled ‘A Tokenized Future for the Australian Financial System,’ Brad Jones, who serves as the assistant governor (financial system) at RBA, explored the possibilities and challenges stemming from the digitization of assets and money in the modern era while also providing insight into the proposed adoption of CBDCs as a currency.

Jones initiated his discourse by delineating the historical evolution of various monetary forms and the development of financial instruments over time. In discussing tokenization and digitized monetary forms in the contemporary landscape, Jones referred to stablecoins and CBDCs.

He asserted that stablecoins issued by well-regulated financial institutions and supported by high-quality assets (e.g., government securities and central bank reserves) could find broad use in settling tokenized transactions. Nonetheless, privately issued stablecoins often come with elevated risks due to the absence of regulatory standards.

On the contrary, Jones contended that CBDCs in the form of tokenized bank deposits could emerge as a robust means for settling transactions. The assistant governor further pointed out that introducing tokenized bank deposits would entail a minor deviation from the current norm, as deposits issued by various banks are already extensively exchanged and settled across the central bank’s balance sheet. Transactions between two parties utilizing tokenized deposits would still be resolved through the transfer of exchange-settled (or wholesale CBDC) balances between the payer and payee banks.

Jones also shared insights from the central bank’s trial CBDC program, highlighting several areas where CBDC could contribute value in wholesale payments, such as enabling seamless settlement in tokenized asset markets. The pilot initiative also underscored opportunities for a wholesale CBDC to complement emerging forms of privately issued digital currency, specifically tokenized bank deposits and asset-backed stablecoins.

Image by pixabay

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