RBA Expresses Willingness to Explore CBDC as the Future of Currency in Australia
Mitchell Nixon
The Reserve Bank of Australia (RBA) has indicated its readiness to investigate the potential adoption of a central bank digital currency (CBDC) as a prospective alternative to traditional money. In the event of implementation, a CBDC would take the form of a digital token issued by the RBA, signifying ownership stakes in its reserves.
During a presentation at the Australian Financial Review Cryptocurrency Summit on October 16, 2023, Brad Jones, the Assistant Governor (Financial System) of the RBA, delved into the prospects and challenges associated with digitising assets and currency in the modern digital era.
Jones underscored the potential advantages of asset tokenisation in improving efficiency, transparency, and resilience within the financial system. Furthermore, he pointed out how it could fuel innovation and foster inclusivity.
Nevertheless, Jones acknowledged that tokenisation also introduces risks, including regulatory, legal, and operational concerns, and he weighed its implications for monetary policy and financial stability.
He emphasised that stablecoins issued by “well-regulated financial institutions and that are backed by high-quality assets (i.e., government securities and central bank reserves) could be widely used to settle tokenised transactions;“ however, due to the absence of clear regulatory frameworks, stablecoins issued by private entities frequently carry heightened risks. In contrast, Jones suggested that Central Bank Digital Currencies (CBDCs) represented as tokenised bank deposits could emerge as a secure means of settling transactions.
Jones suggests that Central Bank Digital Currencies (CBDCs) could emerge as a more favourable option for conducting tokenised payments. He believes that CBDCs could provide heightened levels of security, reliability, and trustworthiness. Furthermore, he highlighted two potential manifestations of CBDCs.
Firstly, they could take the form of tokenised bank deposits, mirroring the conventional process of transferring and settling central bank balances. Additionally, wholesale CBDCs could serve specialised purposes, catering exclusively to a limited set of wholesale market participants.
Jones discussed the RBA’s proactive exploration of Central Bank Digital Currency (CBDC) as a complement to existing forms of currency. He noted that the RBA recently collaborated with industry partners on a joint research initiative to explore potential use cases for a retail CBDC within Australia.
Furthermore, he unveiled plans for the RBA to work in conjunction with other central banks and international organisations to initiate a pilot CBDC project designed for wholesale applications.
Jones concluded his address by underscoring the RBA’s receptivity to considering CBDC as a potential future currency, emphasising the necessity for further research on how it can best meet the needs and interests of Australians. He also assured that the RBA would persist in monitoring and participating in the ongoing developments in tokenisation and digital currencies, both on a domestic and global scale.