RBA Open to Central Bank Digital Currency as Future of Money

The Rise of Tokenized Money

The Reserve Bank of Australia (RBA) is considering the use of a central bank digital currency (CBDC) as the future of money. This would involve state-issued digital money representing a tokenized form of central bank reserves. In a recent speech titled "A Tokenised Future for the Australian Financial System," Brad Jones, assistant governor (financial system) of the RBA, discussed the opportunities and challenges associated with the tokenization of assets and money in the digital age.

The Potential of CBDCs

Jones highlighted the potential benefits of using CBDCs as a form of money. He emphasized that stablecoins issued by well-regulated financial institutions and backed by high-quality assets could be widely used to settle tokenized transactions. However, he noted that privately issued stablecoins often come with increased risk due to a lack of regulatory guidelines. In contrast, CBDCs in the form of tokenized bank deposits could provide a secure and reliable means of transaction settlement.

Minor Changes to Current Practice

Jones explained that the introduction of tokenized bank deposits would represent a minor change to current banking practices. Deposits issued by different banks are already widely exchanged and settled across the central bank balance sheet. Therefore, a payment between two parties using tokenized deposits would still be settled through a transfer of exchange settled balances between the payer and payee bank.

Potential Value of CBDCs in Wholesale Payments

The RBA has conducted a pilot CBDC program and Jones shared some of the findings. He noted that CBDCs could add value in wholesale payments by facilitating atomic settlement in tokenized asset markets. The pilot project also highlighted the potential for a wholesale CBDC to complement new forms of privately issued digital money, such as tokenized bank deposits and asset-backed stablecoins.

Overall, the RBA is exploring the use of CBDCs as the future of money, recognizing the potential benefits and challenges associated with tokenized forms of currency. As digital money continues to evolve, CBDCs could provide a secure and reliable means of transaction settlement in the digital age.