Australia Open to CBDC: Debating the Future Form of Money

The Reserve Bank of Australia (RBA) is open to central bank digital currency (CBDC) as the future of money. Government-issued digital money represents a tokenized form of central bank reserves.

In one Speech On the topic “A tokenized future for the Australian financial system”, RBA Deputy Governor Brad Jones spoke about the opportunities and challenges presented by the tokenization of assets and money in the digital age. He also highlighted a proposed plan to use CBDCs as a form of money.

Jones began by providing an overview of the use of different forms of money in history and how financial instruments have evolved over time. When talking about tokenization and tokenized forms of money in the modern era, Jones mentioned stablecoins and CBDCs.

“Stable currencies issued by well-regulated financial institutions and backed by high-quality assets (ie government bonds and central bank reserves) can be widely used to settle token transactions,” he explained. However, due to lack of regulatory guidelines, stablecoins issued by private parties often come with high risk. On the other hand, CBDCs in the form of tokenized bank deposits could become a good form of transaction settlement, says Jones.

The deputy governor added that the introduction of bank deposits in token form would represent a slight change in the current practice, as deposits issued by various banks are already largely transferred and settled (equally) across the central bank’s balance sheet. . Payments between two parties using tokenized deposits are still settled by transferring exchange-settled (or wholesale CBDC) balances between receiving and receiving banks.

Jones also talked about some of the results of the central bank’s CBDC pilot program. He cited several areas where CBDCs could add value to wholesale payments, such as facilitating atomic settlement in token markets. The pilot also highlighted the ways in which a wholesale CBDC could complement privately issued digital money, such as tokenized bank deposits and asset-backed stablecoins.