Stablecoins are incredibly important* to the wider crypto ecosystem, but they suffered a PR problem last year. Trust is returning, though – and major bank NAB jumping into the fray helps that.
The reason so much scepticism rose around this crypto sector can largely be put down to the collapse of the Terra ecosystem last year and its UST “algorithmic” stablecoin, which helped spark a crypto-company “contagion” and push the space deep into a bear market it hasn’t really recovered from. Yeah, FTX didn’t help, either.
It wasn’t the first algo stablecoin to depeg from the US dollar, but it was easily the biggest and most dramatic to that point.
To be fair, leading cash and treasuries-backed stablecoins USDC and USDT have kept their pegs pretty much intact throughout.
Now, though, as reported by the Australian Financial Review today, the National Australia Bank (NAB) has developed its own asset-backed stablecoin, dubbed AUDN. It’ll be backed one for one with AUD, held by the NAB.
Why? Well, namely to allow allow its crypto-savvy customers to settle transactions using blockchain technology in real-time using Australian dollars. Because blockchain and digital currencies – they’re the future, didn’t you know?
*Why are they important? Because (when they’re actually stable) they help to minimise price volatility, making them useful as a reliable store of value and medium of exchange within the crypto-transacting space. There are other reasons, including the facilitation of DeFi, but that’s mainly it.
Australia’s 2nd biggest bank, NAB, is launching a stablecoin called AUDN on the Ethereum network.
Could widespread bank adoption of L1 networks to power stablecoins be a bullish thing for crypto?
— Miles Deutscher (@milesdeutscher) January 19, 2023
‘Instantaneous, transparent, inclusive’
Per the report, the NAB has revealed it’s aiming to launch AUDN mid-year for transactions. And which blockchain is it being built on? That’s right – Dogecoi… joking. Ethereum, of course.
Actually, it’s not just Ethereum, it’ll also be facilitated using the highly respected smart-contract chain Algorand as well – one of several Ethereum competitors.
As the AFR notes, it’s the second stablecoin being created by a major Australian banking entity. ANZ created a similar coin last year, called A$DC.
Commenting on the development, NAB’s Chief Innovation Officer, Howard Silby said:
“We certainly believe there are elements of blockchain technology that will form part of the future of finance. That continues to be the source of some debate. But certainly, from our point of view, we see [blockchain] has the potential to deliver instantaneous, transparent, inclusive, financial outcomes.”
Australia’s big four banks attempted to create an industry-wide Australian dollar stablecoin last year. This didn’t pan out due to issues around competition and non-aligned stages of crypto strategy, reported the AFR.
AUDN will largely be used as a settlement token between multiple transacting parties – simultaneously via what’s known as atomic settlement.
It could also be utilised for carbon-credit trading, overseas money transfers and repurchase agreements, said Silby.
A trend that’s expected to continue
For some crypto-industry commentary, Stockhead grabbed some thoughts from Jonathon Miller – Kraken’s managing director in Australia.
Miller noted that the adoption of crypto technology by big player financial institutions, such as ANZ and now NAB, has been “persistent”.
He added that these entities can see the “potential to create significant efficiencies in the financial system – such as instant settlement, atomic swaps, smart contracts and other programmatic potential” – and that it is “an explicit recognition of the competitive advantage over traditional payment systems”.
“We expect this trend to continue, inevitably evolving to include the adoption of various other cryptocurrencies and tokens for increasing use cases in the Australian economy,” Kraken Australia’s boss concluded.