In a recent address at the AFR’s Cryptocurrency Summit, Brad Jones, the Deputy Governor of the Reserve Bank of Australia (RBA), highlighted the potential of tokenized money, including Central Bank Digital Currencies (CBDCs), as the future of currency. According to the RBA, this transition could lead to significant cost savings exceeding $10 billion for Australia.
Jones discussed the role of CBDCs in the future of money while expressing reservations about cryptocurrencies and stablecoins. He identified four forms of tokenized money: unbacked ‘crypto,’ asset-backed stablecoins, tokenized bank deposits, and a wholesale CBDC. However, he contended that cryptocurrencies and stablecoins faced significant hurdles, hindering their mainstream adoption.
Jones emphasized that cryptocurrencies, characterized by wild price volatility, speculative investment appeal, lack of asset backing, and minimal regulatory oversight, were not suitable for serving as secure settlement instruments. He also cited issues related to fungibility, scalability, and high transaction fees.
In contrast, Jones suggested that the BSV blockchain offered solutions to these challenges, citing its capacity for scalability, lower transaction fees compared to mainstream networks, and high fungibility.
Regarding stablecoins, the RBA viewed them as a potential payment medium, but only when issued by regulated financial institutions. Private stablecoins, such as Tether’s USDT and Circle’s USDC, were dismissed due to concerns about credit risk.
In Australia, major banks have ventured into the stablecoin space as they seek to provide alternatives for cross-border transactions. For instance, the National Australia Bank Limited launched its AUDN stablecoin, and ANZ Bank introduced the A$DC stablecoin.
Jones also highlighted the benefits of tokenized deposits, which he argued didn’t face the same challenges as commercial bank deposits and were currently being exchanged and settled at par across the central bank’s balance sheet.
He described a wholesale CBDC as “the ultimate form of safe money” due to its freedom from liquidity and credit risks. However, he acknowledged that it might not be a necessary addition to the financial landscape, in alignment with the RBA’s position that the existing payment channels in Australia suffice for the time being.
In conclusion, the RBA remains open-minded about the evolving forms of digital money and the supporting infrastructure that would best serve the Australian economy in the future, demonstrating its willingness to adapt to changing financial landscapes.
