Australia central bank sees possible cost savings in tokenisation

SYDNEY (Reuters): Australia’s central bank on Monday said tokenised money could help save billions of dollars in costs in domestic financial markets, as it studies whether and how to launch a central bank digital currency.

In a speech on tokenisation, Reserve Bank of Australia (RBA) Assistant Governor Brad Jones said a key priority for the bank was assessing how different forms of digital money and infrastructure could support the development of tokenised asset markets.

Australia’s government on Monday separately outlined proposals for regulating crypto and digital assets that will make platforms subject to existing Australian financial services laws and require platform operators to obtain an Australian Financial Services Licence.

This will include minimum standards for holding tokens, standards for custody software and standards when transacting in tokens.

Jones, who heads the RBA’s financial system division, said tokenisation could deliver hypothetical transaction savings of around A$13 billion ($8.20 billion) a year to issuers in Australia’s capital markets, in part through providing increased liquidity.

Another A$1 billion to A$4 billion could be saved in transaction fees via increased trading volumes and the benefits of atomic settlement, particularly on cross-border payments.

Atomic settlement is instantaneous swapping of an asset for a payment.

The RBA has been studying whether to issue a central bank digital currency (CBDC) of its own and if it would help facilitate atomic settlement in tokenised asset markets.

A wholesale CBDC could also act as a complement to new forms of privately issued digital money, including tokenised bank deposits and asset-backed stablecoins.

“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,” Jones said.

He said the RBA and Treasury would publish a joint report around the middle of 2024 to provide a stock take on CBDC research in Australia and set out a roadmap for future work.

“The question of how we might arrange our monetary system to better support the Australian economy in the digital age is now a key priority for the bank,” Jones added.