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Tokenised Australian Financial System




The Reserve Bank of Australia (RBA) is considering the adoption of a central bank digital currency (CBDC) as the future of currency. This CBDC would represent a digital form of central bank reserves, tokenizing money issued by the state.


In a speech titled "A Tokenised Future for the Australian Financial System," Brad Jones, the assistant governor (financial system) of the RBA, discussed the opportunities and challenges presented by asset and money tokenization in the digital age. He also revealed the RBA's plan to utilize CBDCs as a form of currency.


Jones commenced his speech by tracing the historical evolution of various forms of currency and the transformation of financial instruments over time. When addressing tokenization and modern forms of tokenized money, he highlighted stablecoins and CBDCs.


Jones emphasized that stablecoins issued by "well-regulated financial institutions" and backed by robust assets, such as government securities and central bank reserves, could serve as a means of settling tokenized transactions. However, he pointed out that privately issued stablecoins often pose higher risks due to the absence of regulatory standards. In contrast, Jones suggested that CBDCs, in the form of tokenized bank deposits, could offer a secure and effective method for transaction settlements.


The assistant governor further noted that the introduction of tokenized bank deposits would bring about a relatively minor change compared to current practices. This is because deposits issued by different banks are already commonly exchanged and settled at par across the central bank's balance sheet. Therefore, transactions involving tokenized deposits between two parties would still be settled by transferring exchange settled balances (or wholesale CBDC) between the payer and payee banks.


Jones also disclosed some of the key findings from the central bank's pilot CBDC program. These findings highlighted various areas where CBDC could enhance wholesale payments, particularly in facilitating atomic settlement within tokenized asset markets. The pilot project also underscored the potential for a wholesale CBDC to complement emerging forms of privately issued digital money, including tokenized bank deposits and asset-backed stablecoins.



Reference:

Australia open to idea of CBDC as future of money — RBA (2023) Cointelegraph. Available at: https://cointelegraph.com/news/australia-open-to-cbdc-future-of-money-rba

(Accessed: 16 October 2023).


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