The Reserve Bank of Australia (RBA) is open to the future of currency using central bank-issued digital currency (CBDC), which would represent a tokenized form of central bank reserves.
Brad Jones, Assistant Governor (Financial Systems), Reserve Bank of Australia (RBA) speech Entitled “The Tokenized Future of Australia’s Financial System,” it discusses the opportunities and challenges presented by the tokenization of assets and currencies in the digital age, while elucidating proposed plans to use CBDC as a form of currency.
Jones began his talk by outlining the use of different forms of money over the course of history and how financial instruments have evolved over time. When talking about tokenization and tokenized forms of modern currency, Jones talked about stablecoins and CBDC.
He noted that stablecoins issued by “well-regulated financial institutions and backed by high-quality assets (i.e. government securities and central bank reserves) can be widely used to settle tokenized transactions, however, due to the lack of regulatory guidance, these stablecoins are used by private parties often poses potential risks. Therefore, a CBDC in the form of tokenized bank deposits could become a good form of transaction settlement.
The assistant governor noted that the introduction of tokenized bank deposits would be a minor change from current practice, given that deposits issued by various banks are already widely exchanged and settled (at face value) on the central bank’s balance sheet. Payments between two parties using tokenized deposits will still be settled via ES (or wholesale CBDC) balance transfers between the payer and receiving banks.
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The RBA assistant governor also shared some findings from its CBDC pilot program, including a range of areas where CBDC could add value in wholesale payments, such as facilitating atomic settlement in tokenized asset markets. The pilot program also highlights the opportunity for wholesale CBDC to complement new privately issued digital currencies, namely tokenized bank deposits and asset-backed stablecoins.
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