The Next Era of Financial System Innovation?

Speech

Notes

After Acacia: The Next Era of Financial System Innovation? Brad Jones * Assistant Governor (Financial System) Remarks at the Australian Payments Plus ‘Beyond Tomorrow’ Forum 25 March 2026
– Sydney
Audio 35.9MB Q&A Transcript Watch video: Speech delivered by Brad Jones, Assistant Governor (Financial System), Remarks at the Australian Payments Plus ‘Beyond Tomorrow’ Forum, Sydney Introduction Today I’d like to foreshadow the key findings from Project Acacia – our experimental project
into opportunities to uplift the functioning of Australia’s wholesale markets through the
tokenisation of assets and money. Before I do, some historical scene setting is in order. Seismic innovation in the way that assets and money move through the global financial system occurs
rarely. A reading of the history of past episodes suggests three enabling conditions stand out. First is a
compelling economic value proposition from innovation that can be scaled to meet the changing demands of
investors, issuers and the global economy. Second is technology that is up to the task of making the
system more efficient and resilient. Third is public-private coordination to break through the inertia
that often results from entrenched network effects in finance, and to overcome coordination failures when
the ultimate payoffs to reform might be uncertain and likely to accumulate only over the longer term. The last era to fit this characterisation was the transition from the centuries-old paper-based system of
ledgers and money to an electronic system. As obvious as the benefits might now seem, this transformation
did not occur overnight, nor did it occur without resistance from incumbents. So what happened? In short, the increasing demands of market participants simply overwhelmed the ability
of longstanding conventions to keep up. Wall Street found itself drowning in paper amid a host of
institutional failures, so much so that in the early 1970s the US House of Representatives Committee on
Commerce and Finance convened a special inquiry to investigate what could be done about the ‘paper
crisis’. 1
The result was that Wall Street turned to the latest cutting edge technology of the time (computers) to
keep track of the ownership of paper securities and confirmation of monetary settlement. This heralded
the beginning of the end of the era where purchasing a financial security or accepting securities as
collateral meant receiving a physical certificate in the post a week later. Even then, the process of ‘dematerialising’ securities and transitioning trading activity and
record-keeping to electronic ledgers that commenced in the late 1960s took decades to fully embed at the
global level. As late as 1987, just down the road from here, price discovery still consisted of the
scribbling of chalk on blackboards as brokers barked out orders. Comprehensive reform took a coordinated
push by both the private and public sectors around the world. Industry developed new infrastructure to
support electronic trading, clearing and settlement, record-keeping and safe custody; central banks
overhauled their settlement infrastructure; and legal and regulatory reform streamlined rules for
securities issuance and clearing and settlement licensing in a manner fit for the electronic age. 2 Fast forward to today, and a key question now animating policymakers globally is whether the tokenisation
of assets and money represents the next epoch-defining shift in the operation of the financial system, or
a modest extension of today’s electronic arrangements – one that is more evolution than
revolution. In this debate, it is important to recognise that tokenisation does not transform the
economics of underlying real-world claims. It is simply a process whereby money and assets are
represented as digital tokens that can be stored, traded and transferred on programmable platforms,
enabling them to interact in new ways. The most fervent advocates of the view that tokenised finance and related infrastructure upgrades will be
revolutionary emphasise a range of potential benefits: 24/7 trading platforms offering investors and issuers constant access to
liquidity and improved collateral mobility. Instantaneous ‘atomic’ settlement to reduce counterparty risk, where money and assets are
pre-positioned and can be exchanged on the same ledger on an all-or-nothing basis. Efficiency and functionality benefits from programming tokenised assets and money to interact in
predefined ways that are not currently possible. Cost and risk reductions for issuers and investors resulting from a reduced role for intermediaries
performing manual tasks relating to reconciliation, asset servicing and compliance. More sceptical critiques question whether these benefits will be as profound as some claim and whether the
challenges are understated. To name a few: The prospect that liquidity is fragmented across multiple trading venues or tied up in pre-funded
trades. Uncertainty about the scalability, security and resilience of underlying technologies. Interoperability challenges with synchronising new and existing infrastructure. Legal uncertainties surrounding tokenised claims and the smart contracts that govern their
programmability. There is, of course, a large space in between the extremes of these perspectives. A few years ago I posed the question of whether tokenised markets had a future in Australia’s
financial system, and if so, how new forms of money and infrastructure might support them. 3 We set out to
understand these issues through Project Acacia – a collaborative research project with the Digital
Finance Cooperative Research Centre (DFCRC) and industry – examining whether tokenised forms of
money and assets could enhance the functioning of our wholesale asset markets. The Payments System Board
and Council of Financial Regulators (CFR) have engaged closely in this initiative, recognising the
significant global momentum now building in this direction, and that dynamism in our wholesale financial
markets has significantly lagged that in other areas of the Australian financial system like retail
payments. Let me cut to the chase on our main findings and the path ahead. First, we no longer see the main question as whether tokenisation has a future in
Australia’s financial system, but rather, how . Our findings in Project Acacia build on
those from our previous central bank digital currency (CBDC) pilot, 4 and external research, in suggesting
the potential for tokenisation – when coupled with infrastructure design and payment system
upgrades – to reduce risk while unlocking greater efficiency and functionality in our wholesale
markets. Analysis recently published by the DFCRC quantified these potential gains for the Australian
economy in the order of $24 billion per annum, and larger still if new markets emerged and second
round effects are included. 5 To be sure, tokenisation gives rise to a number of
issues that should be subjected to closer scrutiny – a point we have previously stressed. But we
have now seen enough to warrant intensified focus on how some of the potential benefits
might be realised, consistent with system-wide stability. Second, realising even a fraction of these potential benefits in coming years will require longstanding
impediments to innovation in Australia’s financial system to be addressed. As much as Project Acacia
has revealed strong industry interest in tokenised finance, a range of factors have stymied dynamism in
our wholesale markets to date: a lack of competitive tension reflecting entrenched network effects; risk
aversion, partly reflecting perceived legal and regulatory uncertainty; and coordination
failures that have made strategic planning difficult. Third, and most holistically, unlocking a new spirit of innovation in our wholesale markets is beyond the
scope of any individual institution, public or private. The coordination challenges are very real.
Unleashing more dynamism in Australia’s financial economy, enhancing our attractiveness as a
destination for capital in the digitalising global economy, and strengthening our sovereign resilience at
the same time, is likely to require a Team Australia effort. This will require all stakeholders to
approach things differently. In the background is the momentum already building in key financial centres:
witness, for instance, the sharp increase in tokenised asset issuance internationally (Graph 1);
daily activity in tokenised repo markets in the United States now approaching US$400 billion; the US
Securities and Exchange Commission’s recent rule change allowing the Nasdaq to facilitate trading of
tokenised equities; and Clearstream’s launch of a tokenised securities platform. 6 To that end, the RBA will be partnering with other CFR agencies, the DFCRC and industry, in pursuit of an
ambitious program of initiatives to support responsible innovation in Australia. A focal point for this
effort will be the RBA’s exploration with the DFCRC into a new digital financial market
infrastructure (DFMI) sandbox. This could allow industry and policymakers to build on the learnings from
Acacia and smooth the path to practical implementation by providing a safe space for the testing and
scaling of tokenised money, assets and new infrastructure in a longer term, stage-gated environment. To
maximise synergies, this exploration will commence following the independent review commissioned by the
Australian Government into Australia’s financial sandbox arrangements. 7 Graph 1 Insights from Project Acacia – industry and policy perspectives Assisted with regulatory relief from ASIC and AUSTRAC, industry participants in Project Acacia explored
20 use cases involving a range of assets, forms of money and settlement arrangements (Table 1). The project benefited from the diverse range of domestic and international participants: among them were
banks; custodians; fintechs; payment system and financial market infrastructure operators; fund managers;
stablecoin issuers; and technology providers. Tokenised assets ranged from government and corporate bonds, repo, and bank term deposits, to investment
funds, trade payables and mining royalties – among many others. Settlement was largely conducted in
two forms of private money (stablecoins and bank deposit tokens) and two forms of central bank money
(wholesale CBDC, and exchange settlement account (ESA) balances). Private and public distributed ledger
technology platforms were utilised, and a novel element of Acacia was the issuance of a wholesale CBDC
onto external ledgers to better understand the associated efficiency and safety issues. As I will set out in a moment, the project findings were broader than initially envisaged, extending
beyond tokenisation to include broader pathways to spurring dynamism in Australia’s wholesale
financial system. Table 1: Assets and Money Featuring in Project Acacia Use Cases (a) Money Central bank money (wholesale CBDC and ESA balances) Tokenised private money (stablecoins and bank deposit tokens) Asset Class Fixed income Government bonds Government bond repos Corporate bonds Term deposits Government bonds Corporate bonds Term deposits Certificates of
deposit Annuities Asset-backed securities Investment funds and other assets Carbon credits Private credit funds Trade payables Investment funds Mining royalties (a) For example, tokenised government bond transactions were settled in both central
bank money and private tokenised money, while tokenised investment funds were only
settled in private tokenised money. Source: RBA. Tokenised assets Let me begin with some insights on the tokenisation of assets. First, the intensity of industry engagement in the project revealed to us a strong and growing appetite to
explore how the potential of tokenised asset markets could be realised, including through more creative
use of market infrastructure. Project use cases highlighted several ways for value to be unlocked:
through improved capital efficiency via reduced settlement frictions and shorter settlement cycles,
reduced counterparty risk, automation of asset lifecycle management, and lower manual processing errors.
Use cases also showed how tokenisation could be used to create assets that appealed to new investor
profiles, potentially opening new channels for funding and liquidity. The programmability of tokenised
assets and money also opened up opportunities to introduce advanced functionality in financial products
and services that would be difficult or impossible to achieve with conventional forms of money and
infrastructure. Second, the project highlighted considerable industry interest in tokenising fixed income and related
assets. This is consistent with trends in the United States and elsewhere (Graph 1; Graph 2).
It is also in line with previous analysis by the RBA and DFCRC highlighting that aggregate efficiency
gains from tokenisation could be material in existing markets because of their size (even if
gains-per-trade are modest), reflecting in part that innovation in Australia’s wholesale markets has
lagged other parts of our financial system. 8 As a case in point, the manner in which banks raise
funding in term deposit markets (accounting for around 15 per cent of total funding) has
changed little in a generation: price discovery, placements and confirmation continue to largely occur
over a mix of antiquated technology – telephones, branches, email and spreadsheets – and
settlement is far from instantaneous. There was particular interest in the tokenisation of government
bonds, given the critical role they play in the financial system as a safe asset and pricing benchmark
for other credit instruments. For this reason, several jurisdictions, including the United Kingdom, are
undertaking tokenised government bond pilots. Graph 2 A third insight was that industry participants generally viewed ‘digitally native’ asset
issuance as the preferred target end state, but recognised that the intermediate path of issuing asset
tokens as ‘digital twins’ is more realistic as tokenised markets develop. In digitally native
issuance, a token is the primary record of value and ownership on the ledger, eliminating the need for
reconciliation with other (off-chain) records; by contrast, tokens that are digital twins represent a
claim on underlying assets that are recorded in an off-ledger register, thus requiring a bridge between
the two. While industry is attracted to features of native issuance like reduced reconciliation,
streamlined custody and increased programmability, legal and operational considerations mean the path of
least resistance is likely skewed toward the digital twin model in the near term. A fourth insight was the importance of interoperability – between new and existing financial
infrastructure, and between systems that operate domestically and those in international financial
centres. I will return to the former in a moment. On the latter, I would simply note that reflecting
Australia’s status as an open economy, our financial markets strongly benefit from active
participation by foreign investors – they keep the cost of capital for Australian issuers lower,
and liquidity in our markets higher, than otherwise (Graph 3). Investors from the United States,
where tokenised markets are developing most rapidly, account for the largest source of foreign investment
in our fixed income markets. A key implication is that if tokenised markets in Australia are to scale,
they will need to offer a safe and seamless experience for investors abroad – building a domestic
walled garden won’t do. Graph 3 A more general insight was that for all this interest, industry has been grappling with impediments to
large-scale commercial adoption. A consistent theme was that further exploration of commercialisation
pathways will require closer coordination across industry, regulators and Government. Greater legal
clarity, including over the enforcement of on-chain records and settlement finality, were cited as
important to unlocking private investment. On the regulatory side, questions focused on the applicability
of financial product designations in tokenised settings, how emerging digital financial market
infrastructures fit within existing licensing frameworks – particularly when the clearing function
is eliminated in tokenised markets – and how prudential standards apply to banks’ digital
asset exposures. Tokenised money Let me now turn to the main insights relating to tokenised money. First, use cases highlighted that in the long run, locating tokenised assets and money on the same ledgers
could yield the largest efficiency gains and operational and settlement risk reduction benefits. 9 However, there
are a range of issues – policy, legal and technological – that need to be interrogated before
this vision comes to pass. This might point to intermediate pathways in the near term where tokenised
assets and money reside on separate ledgers (as today), but are able to seamlessly interact via so-called
synchronisation bridges. Indeed, some use cases found this approach to be implementable today, and that
it entailed minimal loss in settlement efficiency compared with more advanced arrangements involving a
common ledger. Second, the project revealed growing industry interest in the issuance of tokenised private money –
stablecoins and bank deposit tokens. The experience in the United States and to some extent, Europe, has
been that large banks are incentivised to issue deposit tokens when stablecoins are seen to pose a
competitive threat and commercial opportunities arise from activity in tokenised markets. It will be
intriguing to see if this pattern emerges in Australia following the passage of domestic stablecoin
licensing reforms and the growing circulation of stablecoins internationally. One possibility in the
years ahead is that stablecoins and bank deposit tokens have complementary roles: stablecoins playing a
niche role in settlement for smaller greenfield tokenised markets, and bank deposit tokens having a more
prominent role in larger markets. This reflects differences in their ability to scale (given stablecoins
need to import trust through full reserve backing), and that bank deposit tokens build on the trust of
existing bank deposits supported by a long history of prudential regulation and recourse to central bank
liquidity facilities. Third, the project pointed to a sequential role for central bank money and settlement infrastructure
upgrades – one that could expand alongside the growth in tokenised markets. Some participants
found that more expansive use of existing fast payment rails (via the New Payments Platform) and existing
central bank infrastructure could yield meaningful progress in the near-term. An example was a
synchronisation mechanism to orchestrate delivery-vs-payment (DvP) settlement between tokenised asset
platforms and the existing interbank settlement system (RITS) operated by the RBA. I would note here a
similar concept already exists to support property market transactions, where titles and pre-allocated
exchange settlement balances are exchanged. A wholesale CBDC was viewed by industry as potentially
helpful, but far from essential, for tokenised markets to get off the ground – as developments in
the United States had shown. However, as I have previously noted (and the Principles for Financial
Market Infrastructures allude to), if tokenised markets were to become systemically important,
then the case for issuing wholesale CBDC – as the ultimate safe asset with potentially superior
functionality to existing reserves – would strengthen from a financial stability perspective. As
would more material upgrading of central bank settlement infrastructure. I will return to this in a
moment. Life after Project Acacia: The path ahead Opportunities to uplift the functioning of our wholesale markets should be seen in the context of our
larger national challenges around a lack of economic dynamism and need to shape international
technological disruption in Australia’s national interest. In this spirit, the final report on Project Acacia will outline a range of initiatives to be progressed by
the RBA in conjunction with our CFR partners, the DFCRC and industry. This approach reflects the
overarching takeaway from Acacia – stronger coordination across the private and public sectors is
needed to ensure our markets are fit for the future. Tokenisation by itself is no silver bullet, but
might instead be seen as one element of an enhanced payments and financial ecosystem that better serves
the needs of the economy in the digital age. First, the RBA will explore with the DFCRC how a new sandbox could better support responsible innovation
in wholesale markets. Project Acacia and our previous CBDC pilot have been valuable in surfacing a range
of issues associated with tokenisation. But there is now a recognised need to move beyond short-term
pilots, towards longer term, stage-gated environments in which industry can better progress ideas to
commercialisation, and regulators can learn about new technologies and safely adjust their policy
settings if needed. The interaction of wholesale CBDC with bank deposit tokens and stablecoins, and the
synchronisation of tokenised asset ledgers with RITS, will be particular areas of interest.
Internationally, the synchronisation of asset and settlement ledgers is becoming viewed as a way of
making practical, sequential progress – that is, ahead of larger investment commitments by industry
and policy commitments by central banks on wholesale CBDC and overhauling settlement systems. We will be
seeking industry input on these issues, drawing on the type of functionality that already exists for
property settlement and international insights from initiatives like the Bank of England’s
Synchronisation Lab. We envisage this consultation would feed into the RBA’s longer term work into
options for RITS modernisation, aimed at ensuring our critical settlement infrastructure can support the
evolving needs of the financial system well into the future. Second, the RBA will be reviewing its policies for entities that can access ESAs to support competition and innovation in payments. We expect to commence this review once the first tranche of the Government’s payment
service provider licensing reforms has passed Parliament. In the meantime, we are engaging with peer
central banks to better understand the competition and financial stability implications from stablecoin
issuers holding funds in central bank deposits. We note the regulatory framework for the licensing and
prudential supervision of issuers of Australian dollar-denominated stablecoins is an important pillar of
the Government’s approach to developing responsible innovation in the Australian digital asset
industry. Third, in recognising the substantial role that open capital markets and international trade play in the
Australian economy, the RBA will also be stepping up its work in cross-border payments. This includes by
exploring with peer central banks how new forms of money and settlement infrastructure could enhance
wholesale cross-border payments. We will have more to say about this during the year. We also plan to partner with CFR agencies and industry on other joint initiatives. For instance, we will
shortly invite industry to participate in a joint Regulator-Industry Tokenisation Advisory Group, as an
extension of the forum that provided valuable input over the past year. The objective here would be for
regulators and industry to address regulatory, legal and other challenges relating to tokenised assets
and money that were first surfaced in Acacia. Industry told us they valued the opportunity to discuss
these challenges openly and with all regulators in the one room, so we see this forum as a way to keep
the constructive engagement going. Recognising the central role of our commercial banks in the safe and efficient operation of the payment
system – and the two-tier monetary system that has served the country well – an expanded
version of the Deposit Token Working Group will also be convened. The aim here is to build on the
progress of the related group in Project Acacia by developing practical solutions to support the
interoperability of deposit tokens issued by different banks. Finally, CFR agencies will convene an industry C-suite Roundtable on the Future of Digital Finance in
Australia. This forum would be aimed at facilitating more regular senior-level engagement on
international developments as they relate to opportunities and challenges for the country in uplifting
the functioning of our wholesale markets. Concluding remarks It is impossible to foresee where technological change might take the financial system a decade or two
down the road. Some innovations will break through. Others will not survive deeper scrutiny. It remains
an open question where tokenisation will eventually place here. What I can confirm is that ensuring
Australia’s payments, monetary and financial infrastructure arrangements are fit for purpose in the
digital age is a strategic priority for the RBA and the Payments System Board. This is why we are
committed to working with industry and fellow regulators to deepen our understanding of the issues
presented by tokenised finance. Let me conclude with two reflections. First, we could do well to draw on our history of financial innovation that has allowed Australia to punch
above its weight on the international stage in some key areas. After a couple of decades of investment by
the RBA and the CSIRO, Australia became the first country to develop modern polymer banknotes – a
solution to the problems of forgery and damage that plagued paper-based notes for centuries and one that
has since reshaped global currency manufacturing. Australia’s pioneering superannuation system has
grown to be the envy of many retirement systems around the world. In retail payments, Australia’s
fintech capabilities have long been distinguished by world-class innovation. And the introduction of the
New Payments Platform nearly a decade ago encompassed functionalities that were on the global frontier.
In different ways, these innovations all reflected the elements of scalable economic value, robust
technology and public-private engagement I mentioned at the outset. Second, the path ahead I have set out today should be viewed as part of a larger effort by the Australian
policy community to ensure our financial system is positioned for a more dynamic future. This includes
the Government’s current review of Australia’s financial sandbox arrangements and forthcoming
licensing and digital asset platform reforms, 10 and ASIC’s analysis of regulatory and legal
barriers to asset tokenisation and its broader work program around strengthening Australia’s capital
markets. 11 The bottom line is this – a financial system that is more dynamic and resilient to technological
disruption is in our national interest. But it will take a Team Australia effort. Thanks to everyone
involved in Project Acacia for being part of this journey so far. Endnotes * I would like to thank
Jack Hillier, Kylie Stewart and Chris Thompson for their assistance in the preparation of these
remarks. All errors are my own. 1 New York Stock
Exchange (1971), ‘Crisis in the Securities Industry – A Chronology: 1967–1970 ’, Paper prepared for the Subcommittee on Commerce
and Finance, Committee on Interstate and Foreign Commerce, House of Representatives. 2 A century earlier, a
more rapid wave of global financial innovation was ushered in with the introduction of electric
telegraph lines and the Transatlantic Cable, two technological developments that removed enormous
friction from the global economy and financial system. Faster transmission of information
collapsed distance and time. Market participants no longer had to be physically present at an
exchange to trade. Transoceanic communication delays were slashed from one to two weeks to
minutes or seconds. Transaction costs plummeted. And financial markets traded with a level of
efficiency that would have previously seemed unimaginable. 3 Jones B (2023),
‘ A Tokenised Future for the Australian
Financial System? ’, Speech at the Australian Financial Review Cryptocurrency Summit,
Sydney, 16 October. 4 RBA and DFCRC (2023),
‘ Australian
CBDC Pilot for Digital Finance Innovation ’, Project Report, August. 5 DFCRC (2026),
‘Unlocking Australia’s $24b Digital Finance Opportunity’, Report, March. 6 Clearstream (2025),
‘D7 DLT: Clearstream Launches Tokenized Securities Platform’, Media Release,
4 November; Nasdaq (2026), ‘Nasdaq to Launch Equity Token Design, Putting Issuers at
the Center of Tokenization’, Press Release, 9 March; Broadridge (2026),
‘Broadridge’s Distributed Ledger Repo Platform Achieves 457% Year Over Year Growth in
February’, Press Release, 9 March. 7 The Treasury (2025),
‘Independent Review of the Enhanced Regulatory Sandbox’. 8 Jones, n 3; DFCRC, n
5. 9 Similar points have
been made by the Bank for International Settlements, among others. 10 Project Acacia was
also one of the government initiatives highlighted in The Treasury (2025), ‘Statement on
Developing an Innovative Australian Digital Asset Industry’, March. 11 ASIC has already
licensed one entity to trade and settle shares in private companies and units in managed
investment schemes, making it one of the first licenced tokenised markets in the world, and has
also granted licences to a number of firms to provide tokenised assets and stablecoins. See Longo
J (2026), ‘Shaping a Stronger Future for the Asia Pacific’, Keynote address at the
ASIFMA Annual Conference, Sydney, 5 March.