RBA believes Australian CBDC could be beneficial for payments and tokenization

By: Michael Wilson

RBA believes Australian CBDC could be beneficial for payments and tokenization

August 23, 2023 8:08 AM

The Reserve Bank of Australia has concluded its CBDC pilot program and identified four main areas where central bank-issued digital currency could make a difference.

The Reserve Bank of Australia has just finished a pilot program to test the feasibility of a central bank digital currency, finding it useful in four primary areas, including the facilitation of complex payments and the tokenization of assets.

On August 23rd, a 44-page paper→ was released by the Reserve Bank of Australia and the Digital Finance Cooperative Research Centre, detailing their results and highlighting certain use instances where a CBDC wasn't strictly necessary to fulfill the stated goal.

The pilot experiment showed that a CBDC may be useful in four main areas, one of which was the facilitation of "smarter" payments, in which a tokenized CBDC allowed for a variety of complicated payment arrangements that were previously unsupported by existing payment systems.


The paper also noted that a CBDC has the potential to foster innovation in emerging private digital money sectors, increase resilience and inclusivity across the broader digital economy, and boost financial innovation in areas like debt securities markets. 


The pilot study discovered four primary applications for a CBDC, including 
tokenizing assets and making certain payments.Source: RBA.


Multiple proposals from the 16 companies involved in the pilot program pointed out the potential advantages of a CBDC in facilitating "atomic settlements" (transaction settlement that is both instantaneous and simultaneous).

An added benefit of a CBDC is its programmability, which can "improve efficiency and reduce risk in a range of complex business processes."

Participants in the CBDC pilot program were left in the dark about its legal status and regulatory handling because it was designed as a real legal claim on the RBA rather than a proof-of-concept.

Due to holding or dealing in the pilot CBDC, some participants were unsure if they were providing custodial services or dealing in a regulated financial product, according to the research. These problems may be avoided and solutions found if new laws and regulations were put in place before a CBDC was distributed.

The research highlighted scenarios in which a CBDC could prove valuable, but it also acknowledged that similar outcomes could be reached through alternative mechanisms, such as privately issued tokenized bank deposits or asset-backed stablecoins.

"It was unclear that CBDC was necessary primarily in order to accomplish the desired economic outcomes."

The analysis concluded that additional study is needed to properly flesh out the potential benefits of implementing a CBDC, but that doing so could boost efficiency and resilience in some parts of the Australian payments ecosystem.