The Reserve Bank of Australia and the Digital Finance Cooperative Research Centre have released findings from Project Acacia, a joint initiative examining digital money and settlement infrastructure for wholesale tokenised asset markets in Australia.
The report found that asset tokenisation, combined with changes to digital money and settlement arrangements, could improve the efficiency, functionality and resilience of Australia's wholesale financial markets. It also identified challenges that regulators and industry still need to address before such markets can expand.
Project Acacia was carried out with industry participants and supported by the Australian Securities and Investments Commission, the Australian Prudential Regulation Authority and the Australian Treasury, as tokenised finance attracted increasing global attention.
Participants developed and tested 20 use cases across a range of wholesale tokenised asset market activities and asset classes, covering the asset lifecycle from issuance and servicing to trading and settlement.
The use cases also examined different ways to settle tokenised asset transactions, including traditional Reserve Bank exchange settlement account balances, a pilot wholesale central bank digital currency, tokenised commercial bank deposits and stablecoins.
Use case findings
The findings point to potential gains from tokenisation across several parts of the market. The tested use cases indicated scope for faster settlement, reduced counterparty risk, improved capital efficiency and automated asset servicing.
At the same time, the report identified obstacles to scaling tokenised wholesale markets. It highlighted issues requiring deeper analysis by regulators and industry, including matters linked to the broader setting for responsible financial innovation in Australia.
The work will now feed into a broader program aimed at advancing innovation in wholesale financial markets. The multi-stream effort will involve regulators, government and industry participants.
Measures under consideration include closer cooperation between regulators and market participants, a possible regulatory sandbox for digital financial market infrastructure, and an examination of the opportunities and challenges associated with the government's issuance of tokenised bonds. The program also includes continued industry work on interoperable commercial bank deposit tokens, and Reserve Bank consultation on how its settlement infrastructure and exchange settlement account access arrangements might be adapted safely alongside further work on wholesale central bank digital currency.
Regulatory focus
The emphasis on coordination reflects a recurring issue in financial market reform: new technologies often require changes across legal, regulatory and operational frameworks before wider commercial use can take hold. By setting out a structured follow-on program, the Reserve Bank and DFCRC are signalling a shift beyond technical experimentation towards market design and implementation.
Brad Jones said cooperation between the public and private sectors was central to the project.
"The constructive engagement between industry and public sector agencies was a foundation stone for the success of Project Acacia. It surfaced a set of common opportunities and challenges in making our financial system more dynamic and resilient through a period of intense technological disruption. The scope of future initiatives we are outlining today is ambitious - covering tokenised assets, money and new infrastructure arrangements - and recognises that it will take a collective effort to ensure Australia's financial system is well positioned for the digital age," said Jones, Assistant Governor, Financial System, Reserve Bank of Australia.
DFCRC said the project included what it described as global firsts in a research setting, including the issuance of pilot wholesale central bank digital currency on both public and private distributed ledger infrastructure. It presented that work as evidence that Australia could play a prominent role in developing new financial market infrastructure.
Professor Tālis Putniņš outlined the project's view of the commercial implications.
"Project Acacia demonstrated how tokenised assets, digital money and new settlement infrastructure can improve the efficiency and functioning of wholesale financial markets. This includes faster settlement, reduced counterparty risk, improved capital efficiency and automated asset servicing. Australia achieved important world firsts through Project Acacia, including the issuance of pilot wholesale CBDC onto both public and private distributed ledger infrastructure for research purposes, demonstrating Australia's capability to play a leading role in the next generation of financial market infrastructure," said Professor Tālis Putniņš, Co-CEO and Chief Scientist, Digital Finance Cooperative Research Centre.
"DFCRC research estimates that digital finance innovation could deliver $24 billion in annual economic gains for Australia. The opportunity now is to build on the momentum from Project Acacia by translating successful experimentation into real-world adoption through continued collaboration between industry, regulators and government," Putniņš added.