National Australia Bank (NAB) — one of the four largest banks in the country — is gearing up to launch a stablecoin on the Ethereum (ETH) network, the Australian Financial Review (AFR) reported.
The stablecoin called AUDN will be backed 1:1 by Australian Dollars (AUD) held on trust at NAB.
AUDN 2022 mint
The NAB first minted AUDN on the ETH blockchain in December 2022 and burned it to remove it from circulation. Rather than float on crypto markets, AUDN has been created for specific use cases, according to the AFR report.
The NAB is aiming to launch AUDN for institutional clients by mid-year after internal testing, according to the AFR report. NAB is currently testing AUDN by transferring money between subsidiaries and branches — banking regulators are supervising the process.
The AUDN coin will enable NAB users to settle transactions on the blockchain, focusing on carbon credits and reducing the cost of cross-border transactions.
NAB chief innovation officer Howard Silby reportedly told the AFR that the bank’s primary focus would be to use AUDN as a settlement token. With AUDN, NAB aims to move towards “atomic” or instantaneous settlements from the current two days.
“We certainly believe there are elements of blockchain technology that will form part of the future of finance.”
Silby also said that AUDN could be used in repurchase agreements — short-term loans in bond markets — and for “green deposits” that link customer savings to green loans.
Crypto adoption on the rise
NAB is not the first bank to launch its own stablecoin. Australia and New Zealand Banking Group (ANZ) became the first bank to launch its stablecoin A$DC last year. Individual Australian banks started developing their own stablecoins after an attempt by the four biggest banks to jointly create an industry-wide stablecoin fell apart in 2022.
DigitalX, a digital asset firm listed on the Australian Securities Exchange, is planning to use AUDN, once launched, to prove its reserves, the AFR reported.
The Australian government is considering regulating cryptocurrencies, but it is unclear if stablecoins will be part of the initial regulatory regime. In September 2022, a private member’s draft bill suggested regulating stablecoin issuers and placing disclosure requirements on them.