Stablecoins are incredibly important* to the wider crypto ecosystem, but they suffered from a public relations issue last year. Confidence is returning, however – and big bank NAB jumping into the fray is helping that.
The reason why so much skepticism has grown around this crypto sector can largely be attributed to the collapse of the Terra ecosystem last year and its “algorithmic” stablecoin UST, which helped trigger a “contagion of crypto-enterprise and pushing the space deep into a bear market that it hasn’t really recovered from. Yeah, FTX didn’t help either.
It wasn’t the first stablecoin algo to break away from the US dollar, but it was by far the biggest and most dramatic to this point.
To be fair, to lead backed by cash and treasury bills the USDC and USDT stablecoins have kept their pegs pretty much intact throughout.
Now, however, as reported speak Australian Financial Review today, National Australia Bank (NAB) has developed its own asset-backed stablecoin, dubbed AUDN. It will be backed one-to-one with the AUD, held by the NAB.
Why? Well, namely, allowing its crypto-savvy clients to settle transactions using blockchain technology in real time using Australian dollars. Because blockchain and digital currencies are the future, didn’t you know that?
* Why are they important? Because (when truly stable) they help minimize price volatility, making them useful as a reliable store of value and medium of exchange in the crypto trading space. There are other reasons, including facilitating DeFi, but that’s mostly it.
Australia’s 2nd largest bank, NAB, is launching a stablecoin called AUDN on the Ethereum network.
Could the widespread adoption by banks of L1 networks to power stablecoins be a bullish thing for crypto?
— Miles Deutscher (@milesdeutscher) January 19, 2023
“Instant, Transparent, Inclusive”
According to the report, NAB revealed plans to launch AUDN mid-year for transactions. And what blockchain is it built on? That’s right – Dogecoi… joking. Ethereum, of course.
In fact, it’s not just Ethereum, this will also be facilitated by using the well-respected smart contract chain Algorand – one of many competitors to Ethereum.
As AFR notes, this is the second stablecoin created by a major Australian banking entity. ANZ created a similar coin last year, called A$DC.
Commenting on the development, NAB Chief Innovation Officer Howard Silby said:
“We certainly believe there are elements of blockchain technology that will be part of the future of finance. This continues to be the source of some debate. But certainly, from our point of view, we see [blockchain] has the potential to deliver instant, transparent and inclusive financial results.
As the FRG notes, the big four Australian banks attempted to create an industry-wide Australian dollar stablecoin last year. It didn’t work due to concurrency issues and unaligned crypto strategy steps.
AUDN will be widely used as a settlement token between multiple trading parties – simultaneously via what is known as atomic settlement.
It could also be used for carbon credit trading, overseas money transfers and buy-back deals, Silby said.
A trend that should continue
For some commentary on the crypto industry, Stockhead collected some thoughts from Jonathon Miller, Managing Director of Kraken Australia.
Miller noted that the adoption of crypto technology by major 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 potentials” – and that it is 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 to increase use cases in the Australian economy,” the Kraken Australia boss concluded.