Brad Jones, Assistant Governor of the Reserve Bank of Australia, today shared the central bank’s research on the impact of DLT and tokenization on Australia’s capital markets. Its hypothetical estimates found up to A$4 billion (US$2.5bn) in annual transaction cost savings and another A$13 billion (US$8.bn) in reduced cost of capital. The central bank will outline its central bank digital currency (CBDC) roadmap in mid-2024.
Tokenization could lead to big increases in trading volumes, resulting in tighter bid-ask spreads. The figures are based on declines in spreads achieved historically following innovations. We’d note that the BIS published research on the impact of DLT on spreads for asset backed securities (ABS) and found significant improvements. The Australian figures reflect similar benefits.
Apart from spreads, Australia’s estimates include savings from instant or atomic settlement, reduced collateral requirements and fewer settlement fails.
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