One of Australia’s largest banks is set to launch its stablecoin this year. The National Australian Bank (NAB) has been internally testing the stablecoin, known as AUDN, for months and is aiming to launch it mid-year.
NAB’s stablecoin will allow its users to settle their transactions in real-time on a blockchain-powered platform, a report by the Australian Financial Review (AFR) reveals. The bank, which is the third largest by customer assets and second largest by market capitalization, will initially target the carbon credits and overseas transfer markets with the AUDN stablecoin.
NAB believes that blockchain technology will form part of the future of finance, the bank’s chief innovation officer Howard Silby told AFR.
“That continues to be the source of some debate. But certainly, from our point of view, we see [blockchain] has the potential to deliver instantaneous, transparent, inclusive, financial outcomes,” he noted.
The AUDN will be backed one-to-one with Australian dollars held at the bank and will launch on Ethereum, a network that has faced scaling bottlenecks that it’s still struggling to overcome, including switching to proof-of-stake. Last year, South Korea’s central bank conducted a pilot in which it deployed its CBDC on Ethereum, and in its November report, the conclusion was Ethereum couldn’t scale.
NAB became the second Australian bank to launch its own stablecoin after ANZ, the fourth-largest bank in the country, launched its A$DC stablecoin in March 2022. ANZ’s scope was much smaller, however, as it launched the stablecoin to offer some of its clients an easy way into the digital asset world.
NAB says it will target the carbon credits trading industry with the stablecoin, allowing payments and transfers of these credits to take place on the same platform without needing payment counterparties.
“We see a digital cash component as essential. 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,” Silby said.
The bank will also target overseas funds transfers, a sector that has remained inaccessible and expensive for most people despite big leaps in payments technology. With AUDN, the bank believes it could be able to bypass SWIFT, the international payments network through which simple cross-border funds transfers take days.
The race for Aussie stablecoin supremacy
Australia continues to be one of the global leaders in stablecoin developments, with the major banks taking the lead. Industry sources say that the push for stablecoins was to stave off competition from tech companies that are increasingly targeting the payments sector. Though ultimately unsuccessful, Meta’s (NASDAQ: META) push with Libra served as the final rallying call for banks in the country to come up with alternatives.
According to AFR, the initial plan was for the Big Four banks to create a digital Aussie dollar early last year. However, competition concerns sullied the plans. The four banks were also at different stages in their stablecoin development, making cooperation difficult.
With AUDN, NAB will take the lead on the stablecoin front. Already, ASX-listed digital asset company DigitalX has pledged to use the stablecoin once it launches.
“What we learnt from Luna last year is the look through of the back book of the stablecoin is the most important thing: if it is not constructed properly, there is counterparty risk,” remarked DigitalX CEO Lisa Wade.
The company says it will use AUDN to prove its reserves in its digital asset funds.
“Stablecoins are the link in the chain for essential financial market infrastructure and, absolutely, banks have the regulatory advantage – I can trust my deposit,” Wade added.
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