The growing importance of stablecoins in the financial landscape has been evident in recent years, with major players like National Australia Bank (NAB) taking notice. NAB has become the second major bank in Australia to launch a stablecoin, called AUDN.
National Australia Bank (NAB) is among the top four largest financial institutions in Australia, ranked by market capitalization, earnings and customer base.
As the global economy shifts towards digital currencies, the demand for stablecoins has skyrocketed, becoming a crucial component in the financial landscape. With their stability and versatility, they are poised to revolutionize the way we transact and manage our finances.
The stablecoin will allow NAB’s business customers to settle transactions in real-time using Australian dollars. The stablecoin will be launched mid-year and will be used for transactions such as sending money overseas and trading carbon credits.
NAB’s creation of AUDN comes within one year of rival bank ANZ created the first Australian bank minted stablecoin called A$DC. Banks are developing stablecoins as a means to offer their customers a more efficient and secure method of settling transactions.
Stablecoins reduce the volatility seen in many cryptocurrencies by linking value to a real currency. They are currently an essential component in realizing the efficiencies promised by blockchain technology, particularly in settlement processes. Stablecoins allow payment and transfer of digital assets to occur at the same time, as opposed to the current one to two-day delay.
Carbon trading presents a key opportunity for stablecoins as they will allow payment at the same time carbon credits are transferred, without linking to legacy payment networks. This creates trading efficiencies and reduces settlement risk.
Banks are also interested in offering stablecoins to investors in tokenized real-world assets, which would create instant settlement when digital assets are sold, avoiding volatile cryptocurrencies.
NAB and ANZ are working closely with financial regulators to develop rules for stablecoins, with Reserve Bank governor Philip Lowe saying stablecoin regulation should be a priority and treated like bank deposits.
The creation of stablecoins by individual banks emerged after the big four banks in Australia failed to create an industry-wide Australian dollar stablecoin early last year due to competition concerns and varying stages of their crypto strategies.
The banks’ interest in blockchain technology to improve financial markets infrastructure is a competitive pushback against technology companies, as banks seek to take advantage of their trusted and regulated status in the economy.
The AUDN will mainly be used as a settlement token and NAB aims to transition from T+2 to T+0 settlement in some markets. The race by major banks to develop new forms of digital money is also a competitive pushback against technology companies, as banks seek to take advantage of their trusted and regulated status in the economy.
Other local players, such as Novatti, are also developing Australian dollar stablecoins.
DigitalX, an ASX-listed digital asset specialist, has pledged to use AUDN once it is launched to NAB customers to prove its reserves in its digital asset funds and to create real-time atomic settlement for Australian equities.
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