The National Australia Bank (NAB) has announced the launch of its stablecoin project, which it says could change the face of cross-border transactions.
Accompanying the launch was the disclosure that the commercial bank leveraged the stablecoin to execute an intra-bank cross-border transaction. The pilot transaction has since been described as pioneering since it is the first time a global financial institution is throwing all its weight into stablecoins.
The stablecoin, dubbed AUDN, is pegged to the Australian dollar, which the NAB says is fully banked. According to the bank’s press release, AUDN is an ERC-20 token, and through the use of smart contracts, the stablecoin is designed to enable transactions across seven leading fiat currencies.
The currencies supported by NAB’s stablecoin include the euro, yen, pound sterling, Australian, New Zealand, Singapore, and U.S. dollars.
“Bringing multi-currency stablecoins to market demonstrates NAB’s focus on simplifying international banking protocols to increase speed and transparency while lowering costs and reducing complexity for customers,” said Drew Bradford, NAB’s Executive General Manager for Markets.
NAB partnered with the duo of Blockfold and Fireblocks, leading infrastructure providers in the blockchain technology space, for their expertise. Both Blockfold and Fireblocks will assist the bank with smart contract creation, minting, burning, and custody solutions using blockchain.
The stablecoin will be made available for select institutional and corporate clients of the bank with an operational timeline scheduled for the end of 2023.
“This trade marks the first cross-border multi-currency exchange executed by a regulated large financial institution (NAB) backed stablecoin,” said Francois Schonken, BlockFold’s CEO. “The NAB ecosystem of stablecoins puts in place cross-border payment rails that unlock tokenization potential for both real-world assets and financial products.”
Stablecoins are under the spotlight
Regulators have put a spot light on stablecoins which is driven by concerns over the existential risks posed by the asset class. Regulatory activity on stablecoins was heightened following the collapse of Terra’s algorithmic stablecoin, which led to a wave of losses for investors.
To provide adequate protections for consumers, a cross-section of regulators are pining for stablecoin issuers to be regulated like banks. However, stablecoin enthusiasts have decried the idea on the grounds that it could stifle innovation in the industry.
Despite their rejection of the ideas, global regulators under the auspices of the G20 are tilting towards sterner controls under India’s presidency of the coalition of nations.
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