RBA to Launch “Ambitious” Programme after Success of Project Acacia

In a final report on Project Acacia, the Reserve Bank of Australia and the Digital Finance Cooperative Research Centre (DFCRC) have highlighted the potential benefits and efficiencies from tokenisation and digitisation, and unveiled an “ambitious” series of future initiatives.

Project Acacia was led by the RBA and the DFCRC in collaboration with industry participants, with support from the Australian Securities and Investments Commission (ASIC), the Australian Prudential Regulation Authority (APRA), and the Australian Treasury. It was conducted, the RBA says, against a backdrop of growing global momentum in tokenised finance, and identified the potential for asset tokenisation – alongside innovations in digital money and settlement infrastructure – to enhance the efficiency, functionality and resilience of Australia’s wholesale financial markets.

The project showed that opportunities for enhancing the functioning of wholesale markets in Australia do not rely solely on tokenisation, however. The report notes that interim or complementary reforms could also deliver meaningful benefits to issuers and investors. These include more expansive use of existing fast payment rails and central bank settlement infrastructure, better alignment of infrastructure operating hours with global financial centres, and greater transparency in key funding markets.

“The project findings reinforced the continued importance of the two-tier monetary system,” the report states. “Central bank money and associated settlement infrastructure will continue to have a foundational role as an ‘anchor and enabler’ in the financial system of the future, including in mitigating the build-up of systemic risk in wholesale markets as new forms of money and other technologies scale.

As is often the case with these reports, it also highlights how the project identified several challenges to scaling tokenised markets that warrant deeper analysis by regulators and industry. These largely revolved around coordination of efforts, interoperability of digital platforms, and the establishment of a global-recognised regulatory and technology infrastructure.

As part of the project, industry participants developed and tested 20 wholesale tokenised asset market use cases spanning a range of asset classes. The report says these use cases demonstrated potential benefits from tokenisation across the asset lifecycle from issuance and servicing to trading and settlement. The use cases also explored multiple methods for settling tokenised asset transactions using different forms of public and private digital money, including traditional RBA exchange settlement account (ESA) balances, a pilot wholesale central bank digital currency (wCBDC), tokenised commercial bank deposits and stablecoins.

In parallel, the DFCRC chaired a Deposit Token Working Group (DTWG), to examine key legal and regulatory considerations associated with the issuance of bank deposit tokens in Australia. The DTWG included a sub-set of banks involved in use cases and was observed by the regulators.

“The constructive engagement between industry and public sector agencies was a foundation stone for the success of Project Acacia,” says Brad Jones, assistant governor (financial system) at the RBA. “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.”

The new multi-stream programme of work will aim at advancing responsible innovation in Australia’s financial market ecosystem, the report explains, including by addressing unnecessary barriers to adoption of tokenised finance and better supporting the ability of industry to safely explore and scale new ideas that could enhance the functioning of wholesale markets. Three key workstreams are proposed as part of the future programme; covering regulation, industry cooperation and internal RBA initiatives.

For the regulatory workstream the work will establish a forum for regulators to identify, analyse and facilitate resolution of the aforementioned unnecessary barriers, as well the launch of a digital financial market infrastructure sandbox. Also involved will be a tokenised government bond initiative, and a C-suite roundtable on the future of tokenised finance.

The industry workstream will see the establishment of a joint regulator-industry tokenisation advisory group as well as the extension of the DTWG in a risk-controlled environment. Other industry working groups will be established as required, the report notes.

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

The RBA workstream, meanwhile, will see the central bank consult on how its settlement infrastructure could be upgraded to support tokenised assets and money, as well as a review of its current ESA policy to ensure it remains fit for purpose. It will also involve further applied research on wCBDC and the exploration (with international and domestic partners) of how tokenised money could enhance the wholesale cross-border payments infrastructure.

“Project Acacia demonstrated how tokenised assets, digital money and new settlement infrastructure can improve the efficiency and functioning of wholesale financial markets,” explains Professor Tālis Putniņš, co-CEO and chief scientist at the DFCRC. “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.

“DFCRC research estimates that digital finance innovation could deliver $24 billion in annual economic gains for Australia,” he continues. “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.”

The report has received a positive reception from the wider fintech industry, with an undercurrent of warnings around the need for continued cooperation and coordination.

Noting that the proposed framework is “a necessary and well-considered initiative”, Mandy Jiang, CFO and executive director at CloudTech Group, further observes, “The gap between experimentation and commercialisation has historically been a barrier to scaling innovation in Australia. A structured pathway from piloting to real-world adoption gives the industry the confidence needed to invest beyond proof-of-concept work.

“Whether Project Acacia delivers to its full potential will ultimately depend on the pace of uptake and adoption from the industry, alongside government support,” she continues. “The programme outlines ambitious parallel workstreams across tokenised assets, digital money and settlement infrastructure, and coordinating progress across all of these simultaneously will require sustained commitment from both regulators and industry. As with digital asset legislation more broadly, much will depend on the timeliness of regulatory guidance and the willingness to move at the speed the market requires.”

Meanwhile, Effie Dimitropoulos, CEO of AUDD, which took part in Project Acacia, warns, “The findings highlight the urgency of moving from experimentation to implementation. There is strong industry momentum, but realising the benefits of tokenised finance will require coordinated action across government, regulators and the private sector. Clearer regulatory frameworks, improved interoperability and sustained public-private collaboration will be critical to unlocking investment and scaling these innovations.”

Noting that the report proves that “tokenisation works”, and that “the benefits were tested and observed, not modelled in a spreadsheet”, Paul Stonham, chief commercial officer at BTC Markets, also observes, “There has been no shortage of enthusiasm about tokenisation over the past several years. What has been in shorter supply is rigorous, regulator-backed validation. Project Acacia provides that.”

Stonham further asserts that while the technology question has been answered, the coordination question hasn’t. “The report explicitly identifies “challenges to scaling” and the need for deeper regulatory and industry coordination,” he says. “That’s an honest assessment, and an important one.

“In my experience, this is exactly the pattern you see when financial market infrastructure matures,” he continues. “The capability gets proven, then the hard work begins. Getting regulators aligned, getting industry to agree on common frameworks, and making sure the underlying plumbing, in this case the RBA’s own settlement infrastructure, is fit for purpose.”

Pointing out that the action plan in the report addresses all three challenges, Stonham concludes, “These aren’t vague intentions, they’re structured workstreams with named participants and clear scope.”