Australian consortium prepares for pilot exploring money markets, debt tokenization

A new consortium made up of Digital Finance CFC (DFCRC) and Imperium Markets has announced a pilot to explore the potential benefits of asset tokenization to Australia’s money and debt capital markets.

The new pilot follows a previous research study on Australia’s 2023 central bank digital currency (CBDC) experiments. At the time, the test involved using CBDCs to settle money market transactions and saw Imperium Markets team up with the Commonwealth Bank and Westpac.

DFCRC and Imperium Markets’ pilot is expected to run until 2026, seeking to reduce industry risks through the use of blockchain technology.

Processing well over $1 trillion each year, Australia’s money market has been described as analog, given its dependence on manual data inputs that are prone to human error. Apart from errors, the ecosystem is plagued by other operational and settlement risks capable of triggering avoidable losses for investors.

“Blockchain and distributed ledger technology is really about the simplification of markets,” remarked Imperium Markets Chair Rod Lewis. “The current processes are slow and complicated — reliant on outdated technology, phone calls, emails, manual ticketing and spreadsheets.”

With the use of blockchain, the consortium will seek to provide transparency for stakeholders and regulators while gathering data to mitigate inherent industry risk. The pilot is expected to explore the concept of delivery versus payment (DvP), onboarding commercial and other investors to participate in the studies.

“The project is an opportunity to work together to test and build transformative digital finance solutions targeting the efficiency improvements in clearing and settlement between wholesale participants, which our recent research work estimates to be in the billions of dollars annually in Australia alone,” said DFCRC CEO Andreas Furche.

Tokenizing money markets gather steam

Several attempts to tokenize money markets have taken off globally, including offerings by JPMorgan (NASDAQ: JPM) and Broadridge focused on blockchain repo solutions in 2020.

The Reserve Bank of India (RBI) experimented with the concept in 2023 in its wholesale central bank digital currency (CBDC) pilot. However, India’s version, centered on programmability, explored tokenization use cases in the call money market to allow financial institutions access to short-term loans.

“We have started the wholesale CBDC pilot in the call money market and some deals have also taken place,” said an unnamed RBI source at the time. 

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.

Watch: Tokenized was built with blood, sweat and tears