In recent developments, the Reserve Bank of Australia (RBA) has emphasized the potential of tokenized money in revolutionizing the financial landscape. The central bank believes that tokenization could lead to significant cost savings in domestic financial markets.
On Monday, the RBA announced that tokenized money might help save billions of dollars in costs within the domestic financial sector. This statement comes as the bank is actively researching the feasibility and implications of launching a central bank digital currency (CBDC).
Brad Jones, the Assistant Governor of the RBA, delivered a speech on tokenization, highlighting the bank’s focus on understanding how various forms of digital money and the associated infrastructure could bolster the growth of tokenized asset markets.
Jones, who also oversees the RBA’s financial system division, pointed out that tokenization might result in potential transaction savings of approximately A$13 billion ($8.20 billion) annually for issuers in Australia’s capital markets. This estimation is partly attributed to the enhanced liquidity that tokenization could offer.
Furthermore, the RBA estimates that an additional A$1 billion to A$4 billion could be saved in transaction fees. These savings would be realized through increased trading volumes and the advantages of atomic settlement, especially in the realm of cross-border payments. For those unfamiliar, atomic settlement refers to the instantaneous exchange of an asset for a payment.
The RBA’s exploration into the world of CBDCs is not just limited to its potential cost-saving benefits. The bank is also considering how a CBDC could complement new forms of privately issued digital money, such as tokenized bank deposits and asset-backed stablecoins.
Brad Jones stated, “Our overarching position is that we remain open-minded as to the functional forms of digital money and supporting infrastructure that could best support the Australian economy in the future.” He also mentioned that the RBA, in collaboration with the Treasury, plans to release a joint report by mid-2024. This report will provide an overview of CBDC research in Australia and outline a roadmap for subsequent initiatives.
In a parallel development, the Australian government introduced proposals on Monday for the regulation of cryptocurrencies and digital assets. Under these proposals, platforms dealing with these assets will be subjected to existing Australian financial services laws.
Moreover, platform operators will be mandated to acquire an Australian Financial Services Licence. The proposed regulations will also encompass minimum standards for holding tokens, standards for custody software, and standards for token transactions.
Brad Jones concluded by emphasizing the bank’s commitment to understanding how the monetary system can be restructured to better support the Australian economy in this digital age.