AUDN: The Stablecoin Disrupting Cross-Border Transactions

The National Australia Bank (NAB) has commenced testing international transfers using their ERC-20 stablecoin on the Ethereum blockchain. The bank's goal is to create a system that allows for faster and more affordable cross-border transfers than SWIFT. Essentially, this involves conducting transactions with NAB's partners and subsidiaries in various locations such as New Zealand, Singapore, Japan, the United States, Europe, and the United Kingdom.

NAB made a groundbreaking move in January 2023, becoming the second-largest Australian bank to issue its own stablecoin. AUDN is backed by the Australian dollar at a 1:1 exchange rate. Following another Aussie bank, ANZ, NAB introduced A$DC last year. 

First-ever cross-border, multi-currency transactions using a stablecoin created by a major bank were undertaken during the pilot project.

As of March this year, the Reserve Bank of Australia (RBA) has also initiated pilot testing of a domestic central bank digital currency (CBDC) known as the digital Australian dollar. However, according to insider information, it could take a minimum of five years before the CBDC is fully functional and implemented throughout Australia.

NAB representatives have revealed that they have engaged in talks with the RBA about a collaborative rollout of CBDC. They hope for a speedy launch of the digital currency and a partnership between the two financial institutions. Nevertheless, when plans didn't work as expected, NAB chose to chart its own course.

After the conclusion of the pilot program, NAB plans to introduce AUDN to its corporate and institutional customers. This will allow them to use digital assets for payments in the near future, without having to wait for the RBA's CBDC launch, which may take some time.

ANZ Bank is currently searching for opportunities to utilize its own stablecoin beyond RBA's experimental programs, in which it is involved with the Commonwealth Bank (CBA). Meanwhile, other prominent Australian banks like CBA and Westpac have no current plans to create stablecoins, leaving NAB with limited competition in this arena.

NAB's AUDN stablecoins are fully backed by Australian dollars and will be held in separate special accounts as collateral.

“Later this calendar year, we will be doing real customer trades. We have a couple of clients who want to use the technology,” Drew Bradford, NAB’s executive general manager for markets, mentioned.

NAB is teaming up with digital asset infrastructure provider Fireblocks and fintech platform Blockfold. They will aid in smart contract development, token issuance and burning, and will also offer custodian services.

“Now, if a customer wants to do an Aussie dollar payment from New York, they can’t do it in their working day as they have to wait for an Australian bank to open,” Drew explained. “But a stablecoin will let them do that instantly. There will be a cost saving, but it is not the driver for the clients we are talking to.”

Bank representatives see stablecoins as a potential solution to simplifying the process of exchanging foreign currencies at wholesale exchange rates, which are currently provided by companies such as London-based Wise.

NAB drew on American investment bank JP Morgan's expertise in creating the AUDT stablecoin. JP Morgan had previously developed JPM Coin, which allowed their clients to transfer US dollars digitally.

Drew Bradford has stated that bonds are already being issued using blockchain technology, indicating that more services, including mortgages, will likely be provided using decentralized distributed ledgers in the future.

According to Michael Shaulov, the CEO of Fireblocks, the emergence of AUDN stablecoin and the new instant cross-border payment system has positioned Australia as a global leader in asset tokenization and digital financial services.