Regulators worldwide are putting plans in place to regulate a significant class of cryptocurrencies, stablecoins. Australia is at an advanced stage. One of its major financial institutions, the National Australia Bank (NAB), said it completed the first-ever cross-border stablecoin transfer this week.
The bank’s fully backed stablecoin AUDN, pegged 1:1 to the Australian dollar, was used in the intra-bank transfer and marked a first by a major financial institution on a Layer 1 public blockchain.
According to an official statement made by the bank on March 14, the Australian bank confirmed that the transaction was carried out on the Ethereum blockchain using smart contracts for seven major world currencies. These currencies included the US dollar (USD), Australian dollar (AUD), New Zealand dollar (NZD), Singapore dollar (SGD), the Euro (EUR), Japanese yen (JPY), and British pound (GBP).
National Australia Bank’s executive general manager for markets, Drew Bradford, commented on the success of this week’s transaction saying that the bank was focused on developing the safest, most straightforward and most secure digital asset ecosystem in the Oceania country.
As such, the success achieved by NAB in the pilot brought it close to achieving this goal as it shows the potential to reduce cross-border transactions from days to minutes. It also points to a future of instant and affordable international payments compared to the current SWIFT transfer system.
This action moves the bank closer to giving customers of its numerous subsidiaries in New Zealand, Singapore, Japan, the US, Europe, and Britain a more direct and faster experience when making international transfers. Drew Bradford also said that the bank intends to provide corporate transactions of this nature by the end of the year.
“We are committed to pursuing the right digital asset opportunities with clear customer benefits. 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,”
The bank also said it believes that the future aspects of finance will be blockchain-enabled and that it was “already witnessing a rapid change in the tokenization market.” According to Bradford, “the stringent governance frameworks we have in place ensure we can support the creation of a safe and reliable digital financial system.”
The AUDN stablecoins were created as bank liabilities following the ERC-20 standard. NAB partnered with the Fireblocks platform and BlockFold professional services in developing the stablecoin. This included leveraging their expertise to create smart contracts, securely mint and burn the stablecoins, and manage the direct custody of the digital assets on the public network.
Michael Shaulov, Fireblocks CEO and Co-founder commented:
“Australia continues to be a global torch bearer for tokenization in financial services, with NAB leading the charge in the world’s first use case of a large financial institution leveraging a public blockchain for cross-border payment rails.”
Shaulov added that “NAB’s successful trade execution marks the beginning of the evolution of financial services from Web2 to Web3” powered by the underlying blockchain technology as well as “strong governance and risk management.”
Francois Schonken, the CEO and co-founder of BlockFold, said NAB’s cross-border payment execution on a public blockchain “is exhilarating,” marking the first international multi-currency exchange executed using a stablecoin backed “by a regulated large financial institution (NAB).” Schonken added:
“The NAB ecosystem of stablecoins puts in place cross-border payment rails that unlock tokenization potential for real-world assets and financial products.”
NAB’s Stable Coin Is The Second After ANZ’s A$DC
NAB is one of many top Australian banks to have released stablecoins backed by the Australian dollar. According to a statement made in January, the AUDN stablecoin was developed with international remittances and the trading of carbon credits in mind. NAB was one of the nine founding banks of the global Carbonplace blockchain carbon credit transaction network, announced in February.
The first bank to launch an Australian dollar-pegged stablecoin was NAB’s competitor, the Australia and New Zealand (ANZ) Banking Group, which launched A$DC in March 2022. To implement stablecoin laws, NAB and ANZ have been collaborating closely with Australian financial regulators.
Stablecoin regulation must be a top priority, according to Reserve Bank governor Philip Lowe, who also suggested that they be treated similarly to bank deposits.