Australia’s plan for a central bank digital currency (CBDC) has hit a new milestone after recording its first foreign exchange (FX) transaction using the experimental eAUD.
Blockchain infrastructure firm Canvas confirmed via a Twitter thread on May 17 that two digital asset fund managers broke down the transaction: DigitalX and TAF Capital traded the eAUD for USD Coin, a stablecoin pegged to the U.S. dollar.
Pleased that Canvas is participating in the eAUD #CBDC Pilot from @RBAInfo and @DigiFinanceCRC .https://t.co/KhwUKInHDw
— CANVAS (@canvas_defi) March 6, 2023
The transaction was settled on the Canvas’ Connect platform built on Ethereum, which the firm says will offer users “privacy, high speed and low transaction costs,” according to Canvas. The blockchain infrastructure provider added that it would be leveraging its ZK Layer 2 technology to cover the gaping loopholes in present-day FX transactions.
In its proposal to the Reserve Bank of Australia (RBA), Canvas highlighted that FX transactions are blighted by their inability to operate 24/7 all year round. Aside from the frictions of occasional downtimes, cross-border transactions are plagued by high costs and settlement delays.
Canvas remarks that its ingenious use of the proposed eAUD and digital currencies can improve foreign remittances with trades “settled atomically with no counterparty risk.” At the moment, it appears that only USDC transactions are supported on the Canvas’ Connect platform.
The firm added that its operations adhere to the existing finance regulations in Australia, saying that it will carry Know Your Customer and Anti-Money Laundering checks on participants. Canvas affirms that participants will maintain control of their assets.
Globally, central banks are conducting CBDC pilots to improve the payments landscape of their local economies. While some central banks are content to experiment with wholesale CBDCs, others push the frontiers with retail versions with use cases probing cross-border transactions and offline payments.
Australia makes significant progress
Since Australia announced its CBDC pilot in March, several private firms hinted at their desire to participate in the studies. In April, ANZ relied on the CBDC to back its proprietary A$DC stablecoin to trade carbon credit via smart contracts.
“When applied to carbon markets, tokenization has the potential to improve efficiency and transparency, reduce risk and preserve the unique characteristics of underlying projects to incentivize investment in climate solutions,” Nigel Dobson, ANZ banking service lead, said.
Other areas that the Australian bank is keen on exploring with its CBDC pilot include offline payments, nature-based asset trading, corporate bond settlements, and livestock auctions.
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.
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