National Australia Bank to launch AUDN, an Australian dollar-pegged stablecoin
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(Kitco News) - National Australia Bank (NAB), one of Australia’s ‘Big 4’ banks, is preparing to launch an Australian dollar-pegged stablecoin on the Ethereum network, becoming the second bank in the country to do so.
According to a report from the Australian Financial Review (AFR), the bank’s AUDN stablecoin will be launched in mid-2023 and is designed to streamline cross-border remittances and carbon credit trading. The new stablecoin will be fully backed one-for-one by Australian fiat money that will be held in trust at the bank.
Back in March of 2022, Melbourne-based ANZ bank announced the creation of a similar product, known as A$DC, becoming the first bank in the country to create its own stablecoin.
The move by individual banks to create their own stablecoins follows a failed attempt by the big four banks to create an industry-wide Australian dollar stablecoin in early 2022. That effort ultimately failed due to competition concerns and banks being at different stages in their crypto strategy, the AFR said.
Howard Silby, the chief innovation officer for NAB, said the bank’s decision to mint the AUDN stablecoin was based on its belief that blockchain technology will play a crucial part in the evolution of financial services.
“We certainly believe there are elements of blockchain technology that will form part of the future of finance [...] From our point of view, we see [blockchain] has the potential to deliver instantaneous, transparent, inclusive, financial outcomes.”
Both NAB and ANZ have a close working relationship with financial regulators as they work on developing the rules for stablecoins. Previously, Reserve Bank governor Philip Lowe said stablecoin regulation is a priority, and that they should be treated like bank deposits.
NAB believes Blockchain-based carbon trading is an ideal setup for the adoption of stablecoins as they allow payment to occur at the same time that carbon credits are being transferred on-chain, meaning that the legacy payment networks need not be involved. This improves trading efficiencies and helps reduce settlement risk.
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The AUDN also provides its users with a workaround to the slower and more costly SWIFT payment network when conducting cross-border remittances. Other applications noted by Silby include use in repurchase agreements, as a form of short-term finance in bond markets, and for “green deposits,” which link customer savings to green loans.
“We see a digital cash component as essential,” Silby said. “We can see obvious benefits for the cash leg of settlement of carbon credits on a blockchain, and we also plan to use it for cross-border remittance. We are planning to offer stablecoins in multiple currencies in jurisdictions where NAB has licenses.”
The main use of the AUDN will be as a settlement token to help the bank meet its goal of transitioning from T+2 to T0 settlement. This will be achieved through the application of “atomic settlement,” which allows for the simultaneous settlement of multiple linked transactions between multiple parties.