The Reserve Bank of Australia's invitation for feedback on tokenised reserve settlement prompts us all to consider the role of money and the central bank's responsibilities in a modern society.

Aside from the board game with the metal top hat, the word monopoly rarely inspires confidence. In most markets, monopolies are associated with limited competition, higher prices and reduced incentives to innovate. Should we be comfortable with a central bank occupying such a position at the heart of our monetary system? Does our monetary system require an impartial adjudicator or should we allow commercial organisations into this space?

It is a question worth asking as Australia considers the future of digital money.

In September 2026, the Reserve Bank of Australia (RBA) opened a consultation on how its settlement infrastructure could support a tokenised financial system. The consultation paper explores how the Reserve Bank Information and Transfer System (RITS) and the Fast Settlement Service (FSS) could facilitate transactions involving tokenised assets and different forms of private digital money. It also considers the potential future role of tokenised central bank reserves.

This may appear to be merely a technical discussion about payment infrastructure, yet it raises a fundamental question: what role should public money play in a financial system saturated with private digital alternatives?

Allow me to propose that the central bank's privileged role in providing public money is not simply an institutional relic. It delivers important benefits that remain significant as new forms of money emerge.

1. A common foundation makes different forms of money interchangeable

Before undertaking this research, I, like most of us, would rarely think about what happens when we make a bank transfer. We see dollars move from one account to another and reasonably assume that an Australian dollar is an Australian dollar, regardless of where it is located.

But commercial bank deposits are liabilities of individual banks. A dollar deposited with one institution is, legally and institutionally, different from a dollar deposited with another. We generally treat them as interchangeable because the financial and regulatory system supports that equivalence.

Central bank money plays an important role in maintaining this arrangement.

When financial institutions settle obligations through RITS, they transfer funds held in Exchange Settlement Accounts at the RBA. These reserves provide a common settlement asset that does not expose the receiving institution to the credit risk of a private money issuer. The RBA's consultation identifies this function as central to the singleness of money: the ability to exchange different forms of private money at par value.

This is a significant public benefit.

Money works most effectively when people can trust that a dollar is worth a dollar, rather than having to evaluate the institution or platform behind every payment.

The central bank's role in providing a common settlement foundation can help prevent different instruments from becoming isolated monetary systems.

The objective is not to eliminate private money. It is to ensure that different forms of money can continue to function within a greater financial system.

2. Public money provides a settlement asset without private issuer credit risk

The second benefit is confidence in settlement.

Financial markets depend on the ability to complete transactions reliably. When two institutions exchange substantial sums, both parties need confidence that the payment will be completed and that the settlement asset will retain its value.

Central bank reserves provide an important foundation for this confidence. Settlement through RITS is final and irrevocable, reducing the risk that an obligation will remain unsettled or be reversed after completion.

This matters in conventional financial markets, but it could become even more important as financial assets are tokenised.

Tokenisation can enable the transfer of assets on programmable digital platforms. It may support faster transactions, more automated processes, and the simultaneous exchange of assets and payments. Yet, digitising an asset does not, by itself, resolve the question of what constitutes final payment.

A transaction can be technically successful while still depending on the creditworthiness of a private issuer, the reliability of an intermediary or the legal enforceability of the settlement arrangement.

Technological finality and legal finality are not fundamentally the same thing – it's important to make this distinction.

3. The central bank can enable competition rather than suppress it

A central bank's legislative position does not mean that it should control every payment service or dictate how every digital financial product is designed or used.

Indeed, the strongest argument for maintaining a central bank settlement foundation is that it can allow competition in the private financial system to flourish.

Private institutions can develop new payment applications, tokenised deposits, stablecoins and digital asset platforms. They can compete on user experience, transaction speed, programmability and specialised services. Different technologies and business models can emerge to serve diverse customers and markets.

But competition between private providers does not necessarily require competition between the underlying units of account.

The distinction is between allowing firms to innovate in how money is used and allowing the monetary system itself to fragment into instruments that no longer exchange seamlessly.

A shared settlement foundation can help reconcile these objectives. It gives private providers room to experiment while preserving a common point of connection to central bank money.

This is particularly relevant to the RBA's current consultation. Rather than committing to a particular digital currency model, the Bank is examining how existing settlement services might support tokenised finance, as well as longer-term possibilities involving tokenised reserves.

That is a pragmatic approach. It recognises that the public interest may be served not by replacing the entire monetary architecture, but by adapting its foundations to accommodate new forms of financial activity.

4. Monetary stability requires more than technological innovation

Digital money is often discussed in terms of what technology makes possible: programmable transactions, automated compliance and new ways of exchanging assets.

These capabilities may offer genuine benefits. However, they do not automatically produce a safer, fairer, or more efficient monetary system.

The design of digital money also determines who can issue it, who can access the settlement infrastructure, who bears the risks and what protections apply when something goes wrong.

Through this consultation, the RBA is seeking views on whether stablecoin issuers might be given access to central bank reserves in the future. Such access could support liquidity management and back stablecoin arrangements. Yet it would also raise questions about eligibility, operational safeguards and the appropriate relationship between private issuers and public financial infrastructure.

These questions concern the allocation of public trust and financial risk. A central bank's role is to help ensure that the monetary system continues to meet its public purposes as the technology changes. Indeed, the RBA is legislatively bound to do so.

Summary

The broader policy challenge is to determine which functions need to remain anchored in public money, which can be delivered competitively by private providers, and how the two can interact safely.

The debate about central bank money is often framed as a choice between old institutions and new technologies, or between public control and private innovation.

Setting aside this false dichotomy, a monetary system needs both innovation and continuity. It needs the flexibility to accommodate new technologies without losing the confidence that allows people and institutions to accept money from one another.

As tokenised assets and private digital money develop, the central bank’s settlement role may become more important, not less. Its task is to help preserve the conditions under which different forms of money can coexist and remain interchangeable.

This is also why the future of money cannot be determined by technology alone. Legal frameworks establish rights and obligations; public policy determines the objectives the system should serve; and technical design determines how those objectives can be implemented in practice.

The central bank’s privileged position is valuable to the extent that it supports these wider public purposes. The real objective is not a monopoly for its own sake. It is a monetary system in which innovation can flourish without undermining the trust, finality and common value on which money depends.