By: Isha Das
The Reserve Bank of Australia (RBA) is currently examining the possibilities of adopting a Central Bank Digital Currency (CBDC). Assistant Governor Brad Jones suggests that CBDCs and tokenization could become significant aspects of future financial systems. The RBA's thoughts on CBDC echo the global trend towards digitisation of currencies and financial infrastructures.
On the other side of the globe, the Bank of Canada has also published a staff note on Decentralized Finance (DeFi), shedding light on the financial innovations offered by the DeFi ecosystem as well as the challenges and risks associated with its use. The bank identified three potential areas for DeFi transformation: frictionless financial service offerings, open competition, and transparency.
Both financial institutions also recognised the risk associated with privately issued digital currencies, such as stablecoins, due to limited regulatory oversight. Whereas, risk is mitigated with CBDCs as they would be issued and backed by central banks.
Overall, these developments underline a broader global interest and extreme caution in digital currency systems, such as CBDCs and DeFi. The coming years will be crucial for these futuristic concepts as they try to break into traditional finance.
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