Sibos 23: the start of something bigger

Digital currencies will have a transformative impact on the payment landscape around the world, according to Robert Porter, Director, Digital Asset Services at ANZ Institutional - and insights from the recent Reserve Bank of Australia Central Bank Digital Currency pilot project show we’ve just scratched the surface of their potential.

Speaking at an ANZ customer event in the lead up to the 2023 Sibos financial services conference, Porter said the pilot project showed how the sector, including regulators, was taking a collaborative approach to CBDCs - and the results so far were encouraging.

“I think it's the start of something bigger,” he told the call. “And even though the pilot is finished we’re very much looking forward to taking those lessons forward with our [institutional] customers.”

ANZ worked on three use cases through the pilot, which was run by the RBA and Digital Finance Cooperative Research Centre, plus an additional case as a distributor. The ANZ cases focussed on using CBDC in relation to superannuation payments, offline payment capability, and nature-based assets in the form of carbon credits.

The results led to “really positive, strong feedback from customers and wider industry.” Porter said, leading the bank to believe there is more to come.

“We think there's an opportunity to do a lot more in that particular space,” he said.

Porter spoke on the call with Nigel Dobson, ANZ’s Banking Services Portfolio Lead, and Luke Perkins, ANZ’s Head of Global Cross-Border Payments Product. The call was hosted by Inga Bambalaite-Saliba, Director, Digital Advisory at ANZ.

Coexistence

Porter said a key takeaway from the pilot for ANZ was that CBDCs would help complement, rather than replace, private-sector innovation in the payment space.

“In the same way that we see commercial bank and central bank money today in non-token form, we anticipate we will see that moving forward in tokenised form as well,” he said.

Perkins said the evolution of digital assets as a payment tool was happening as technology advanced to allow real-time, cross-border ‘traditional’ payments in some circumstances. For his mind, they are “complementary services”.

“Each infrastructure has its use case at the moment,” Perkins said. “And I think they are evolving. Certainly, from our perspective, we see [digital assets] as complementary.”

He said the reality was, regardless of the speed of advancement in payments, the current state would exist for the short-to-medium term, and the sector had a role to improve that.

“Long term, I think ultimately we don't know yet how far and wide the space of digital-asset services is going to enable us,” Perkins said.

“I think it's important we also work on the basis that [digital assets] may never reach 100 per cent of what we do as financial institutions in the international payments space. And that is a place where the real-time payment networks absolutely play a key role.”

The Australian market in particular was on the edge of a “real shift’ in the payments space, he said, thanks to technology like the NPP international payments service.

“We can potentially move to a world where our customers are banking when it's convenient for them,” Perkins said. “They are no longer restricted or constrained by the various limitations we typically have in place… moving across borders.”

Perkins said there was still work to do, but the new tools were a “major stepping stone in the world of cross-border payments”.

“I certainly think it's a great pathway forward to a greater, frictionless digital services across international payments,” he said.

“Everyone wants to get their money faster. We think it's important to make sure that we can do that in a very simplistic way and make sure we can do that as effectively and as quickly as possible.”

The holy trinity

Dobson said digital assets would increasingly become “the system of record for many parts of our economy”.

“We think the main benefits are the potential for greater transaction efficiency and the mitigation of settlement related counterparty risk,” he told the call.

The tech creates significant efficiency and cost savings, making it “better, faster and cheaper” than existing forms of financial services, Dobson said - “the Holy Trinity, I should say”.

And “as trusted and regulated institutions,” banks are best placed to “leverage our core expertise to help our clients participate in the token economy in a safe, secure and compliant way”, he said.

For Porter, while the opportunity is clear, there are still complex issues to be resolved in the digital asset space, particularly regarding legislative and regulatory frameworks.

There are design tradeoffs, privacy considerations and the potential benefits of alternatives such as tokenised forms of bank deposits all to be considered, he said.

“We know it will be a few years away, but [the pilot] certainly has been quite a useful learning exercise,” Porter said. "We're expecting some more research to be undertaken in the coming years.”