Australia’s Central Bank Considers Tokenisation for Cost Savings in Financial Markets
Australia’s Central Bank Explores Tokenisation for Cost Savings
Australia’s central bank is investigating the potential benefits of tokenised money in domestic financial markets. The Reserve Bank of Australia (RBA) believes that tokenisation could lead to significant cost savings, potentially reaching billions of dollars. Assistant Governor Brad Jones has highlighted the importance of assessing different forms of digital money and infrastructure to support the development of tokenised asset markets.
Australia Proposes Regulation for Crypto and Digital Assets
The Australian government has separately introduced proposals for regulating crypto and digital assets. Under these proposals, platforms will be subject to existing Australian financial services laws and will be required to obtain an Australian Financial Services Licence. The regulations aim to establish minimum standards for holding tokens, custody software, and transactions involving tokens.
Potential Savings and Benefits of Tokenisation
Brad Jones, who heads the RBA’s financial system division, suggests that tokenisation could deliver significant transaction savings. Hypothetically, tokenisation could result in savings of around A$13 billion ($8.20 billion) per year for issuers in Australia’s capital markets. These savings could be achieved through increased liquidity. Additionally, transaction fees could be reduced by A$1 billion to A$4 billion through increased trading volumes and the advantages of atomic settlement, especially for cross-border payments.
Exploring Central Bank Digital Currency (CBDC)
The RBA has been evaluating the potential issuance of a central bank digital currency (CBDC) and its role in facilitating atomic settlement in tokenised asset markets. A wholesale CBDC could complement privately issued digital money, such as tokenised bank deposits and asset-backed stablecoins. Jones emphasized the RBA’s open-minded approach to different forms of digital money and supporting infrastructure that could best support the Australian economy in the future.
Future Research and Roadmap
The RBA, in collaboration with the Treasury, plans to publish a joint report by mid-2024. This report will provide an overview of CBDC research in Australia and outline a roadmap for future work. Jones reiterated that adapting the monetary system to better support the Australian economy in the digital age is a key priority for the bank.
Conclusion
Australia’s central bank recognizes the potential cost savings and benefits of tokenisation in domestic financial markets. As the RBA explores the issuance of a central bank digital currency, it aims to assess different forms of digital money and infrastructure to support the development of tokenised asset markets. The proposed regulations for crypto and digital assets in Australia further highlight the country’s commitment to fostering a secure and regulated digital economy.
