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National Australia Bank (NAB) has piloted its own stablecoin via Ethereum, completing its first intra-bank cross-border transaction.
In the transaction, NAB deployed stablecoin smart contracts for seven major global currencies, demonstrating the potential to cut cross-border transactions from days to minutes. NAB, one of Australia's big four banks, described the transaciton as a "world-first by a major financial institution on a layer-one public blockchain."
The stablecoin will be issued under the ticker AUDN and is fully backed one-for-one with the Australian dollar.
NAB believes that transacting on a public, permissionless layer-one blockchain will allow for greater transparency, accessibility and scalability. The bank plans to enable transactions for the Australian, New Zealand, Singapore and US dollars, euro, yen and pound.
It expects to be supporting select corporate and institutional clients to transact using digital assets by the end of 2023.
“We believe that elements of the future of finance will be blockchain enabled and we’re already witnessing rapid change in the tokenisation market,” Drew Bradford, NAB markets executive general manager, said in the press release.
Fireblocks has partnered with NAB to build and deploy its stablecoins. The technology provider will leverage their expertise for smart contract creation, securely minting and burning its stablecoin and managing the direct custody of the digital assets on the blockchain technology.
Stablecoins on the rise
Over 99% of existing stablecoins are backed by USD. Other non-USD backed stable coins include StraitsX's XSGD, which is backed by the Singapore dollar.
Read more: Chinese Yuan-Pegged Stablecoin Backed By KuCoin, Circle
Recently, Circle and KuCoin backed Chinese yuan-backed stablecoin CNHC in a US$10 million funding round. As well as eliminating exchange risks for Chinese exporters, CNHC offers a way for investors who value the strength of CNH to hedge against currency risk.
Earlier this month, CFTC chair Rostin Behnam spoke at the Senate Agriculture committee hearing, declaring that stablecoins should be treated as commodities.
Read more: Sorry SEC, Stablecoins Are Commodities According to CFTC
The view opposes that of Securities and Exchange Commission (SEC) chair Gary Gensler, who has been considering whether the assets are securities.
The demand for stablecoins has since increased. Markus Thielen, head of research at Matrixport, noted, "We have seen an increase in stablecoin activity as a sign that crypto firms are using crypto rails to move money around."
Read more: Stablecoin Demand Grows After Silvergate Exodus
Furthermore, Thielen claimed the increased activity shows that crypto dealers are resorting to digital assets as an alternative to traditional financing, given that they are now unable to clear through Silvergate’s Exchange Network.
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