The assistant governor of the Reserve Bank of Australia stated that pilot projects have identified several potential use cases for central bank digital currencies.
The Reserve Bank of Australia (RBA) is ready to explore the potential of a central bank digital currency (CBDC) as a transformative evolution in the future of money.,Digital tokens representing central bank reserves could play a pivotal role in the financial landscape.
In his speech titled “A Tokenized Future for the Australian Financial System,” Brad Jones, assistant governor (financial system) at the RBA, outlined the opportunities and challenges presented by tokenization and discussed how CBDCs could be used as digital money.
Jones began his remarks by describing the evolution of money throughout history and the various financial instruments that have emerged over time.
During his speech, Jones mentioned stablecoins and CBDCs as examples of tokenized forms of money that have emerged in the modern era.
He stated that “well-regulated financial institutions that are backed by high-quality assets (i.e., government securities and central bank reserves) could widely use stablecoins to settle tokenized transactions.” Nevertheless, the absence of clear regulatory frameworks frequently leads to heightened risks associated with stablecoins issued by private entities. Conversely, he contends that CBDCs in the shape of tokenized bank deposits could emerge as a secure and effective means for settling transactions.
Since banks already exchange and settle bank deposits via the central bank balance sheet, Jones proposed that implementing CBDCs in the form of tokenized deposits would be a relatively minor change from the current system.
According to Jones, even with a payment between two parties using tokenized bank deposits, the settlement would still occur via a transfer of wholesale CBDC balances between the payer and payee bank.
One of the potential benefits of CBDCs in wholesale payments, according to Jones, is their ability to facilitate atomic settlement in tokenized asset markets. This is one of several areas where CBDCs could add value, as shown by the findings of the central bank’s pilot program.
The pilot project revealed that a wholesale CBDC could complement new forms of privately issued digital money, such as tokenized bank deposits and asset-backed stablecoins.