Global: Reserve Bank of Australia Explores Central Bank Digital Currency (CBDC) as the Future of Money

The Reserve Bank of Australia (RBA) has expressed its openness to adopting a central bank digital currency (CBDC) as the future of money, envisioning state-issued digital currency representing a tokenized version of central bank reserves.

During a speech titled “A Tokenised Future for the Australian Financial System,” Brad Jones, Assistant Governor (Financial System) at RBA, discussed the opportunities and challenges presented by the tokenization of assets and money in the digital era. He shed light on the proposed plan to incorporate CBDCs as a form of currency.

Jones initiated his speech by tracing the historical evolution of various forms of money and financial instruments. When addressing tokenization and tokenized money in the modern context, he highlighted stablecoins and CBDCs.

Jones emphasized that stablecoins issued by “well-regulated financial institutions and backed by high-quality assets (e.g., government securities and central bank reserves) could serve as a common means for settling tokenized transactions.” However, he pointed out that privately issued stablecoins often carry increased risks due to the absence of regulatory guidelines. In contrast, Jones suggested that CBDCs, in the form of tokenized bank deposits, could be a viable method for transaction settlement.

The Assistant Governor further noted that introducing tokenized bank deposits would represent a minor change from the current practice, given that deposits issued by various banks are already widely exchanged and settled across the central bank’s balance sheet. Transactions using tokenized deposits would still be settled through the transfer of exchange-settled (or wholesale CBDC) balances between the payer and payee banks.

Jones shared insights from the central bank’s pilot CBDC program, highlighting areas where CBDCs could bring value to wholesale payments, particularly in enabling atomic settlement in tokenized asset markets. The pilot project also illuminated opportunities for a wholesale CBDC to complement emerging forms of privately issued digital currencies, including tokenized bank deposits and asset-backed stablecoins.