Brad Jones: Financial innovation and the future of CBDC in Australia

Speech by Mr Brad Jones, Assistant Governor (Financial System) of the Reserve Bank of Australia, at the Intersekt Conference, Melbourne, 18 September 2024.

The views expressed in this speech are those of the speaker and not the view of the BIS.

'Money shapes economies, economies shape nations, nations shape history.' This quip from Larry Summers, though pithy, contains a kernel of truth. It is equally true that through history, bursts of technological innovation have intersected with changing needs of the economy to generate profound implications for society. Look no further than the introduction of paper money to replace copper coin in China's Song dynasty, the development of double-entry ledgers in Renaissance Europe, the laying of the transatlantic cables in the 1850s and the dematerialisation (electronification) of securities half a century ago.

Fast forward to today, rapid innovation in technology and structural change in the financial economy is again raising important questions about whether our monetary arrangements are fit for purpose – this time in the digital age.

It is great to be here at Intersekt. This is an important forum where industry and members of the policy making and academic community can come together to discuss issues that will shape our financial future. It is also timely because this morning the RBA and Treasury will publish their first ever joint paper – part stock take, part roadmap – on central bank digital currency (CBDC) and the future of digital money in Australia. This is the latest initiative to emerge from the RBA's expanding work program on the future of money. I am here this morning to highlight three key messages from this work.

First, and with the strong endorsement of the Payments System Board, I can confirm that the RBA is making a strategic commitment to prioritise its work agenda on wholesale digital money and infrastructure – including wholesale CBDC – rather than retail CBDC. At the present time, we assess the benefits to the economy as more promising, and the challenges less problematic, for a wholesale CBDC compared to a retail version. This recognises that unlike a retail CBDC that would be issued for use among the public, a wholesale CBDC would represent more an evolution than revolution in our monetary arrangements. It also recognises the stabilising role of central bank money in the settlement of wholesale market transactions, particularly in markets that are (or could be) systemically important – a point emphasized in international standards.