On Tuesday, the National Australia Bank (NAB) announced the successful execution of the cross-border transaction via its stablecoin. This also marked the first ever cross border stablecoin transfer by a renowned financial institution on layer 1 blockchain.
The bank shared a press release briefing about the experiment. It said that the intrabank transfer used the bank’s stablecoin which is fully backed by Australian currency i.e. the Australian Dollar (AUD).
According to the press release shared by NAB, the transaction was conducted on the Ethereum blockchain and used smart contracts for seven currencies. The stablecoins were freshly minted as bank liabilities on the ERC-20 standard.
NAB partnered with the FireBlocks platform and BlockFold professional services consultants on the project. FireBlocks is an easy to use platform to create new blockchain based products, and manage day-to-day digital asset operations whereas BlockFold is a professional services consultancy specializing in tokenization and smart contract development.
According to FireBlocks, those currencies were Australian, New Zealand, Singapore and United States Dollars, as well as Euros, Japanese Yen and British Pounds.
Drew Bradford, NAB executive general manager for markets, said that the bank was investing to develop Australia’s safest, simplest and most secure digital asset ecosystem. He said that the bank is committed to pursuing the right digital asset opportunities with clear customer benefits. Bradford added:
We believe that elements of the future of finance will be blockchain enabled and we’re already witnessing rapid change in the tokenisation market. The stringent governance frameworks we have in place ensures we can support the creation of a safe and reliable digital financial system.
In its press release, the NAB said that the pilot showed the technology’s potential to cut transaction time from days to minutes and that it was a part of the bank’s focus on simplifying international banking protocols. It added that it expected to support corporate and institutional clients transacting in digital assets by the end of the year.
The executives of the partner blockchain firms also shared their opinions. Following is an excerpt from one of them.
NAB’s multi-currency cross border settlement execution on a public blockchain is exhilarating. This trade marks the first cross-border multi-currency exchange executed by a regulated large financial institution (NAB) backed stablecoin. The NAB eco-system of stablecoins puts in place cross-border payment rails that unlock tokenization potential for both real world assets and financial products.
Francois Schonken, BlockFold CEO and Co-founder
NAB is the second major Australian bank to issue an Australian dollar-backed stablecoin. Before NAB, Australia and New Zealand Banking Group became the first bank to issue an Australian dollar-linked stablecoin (A$DC) in March last year.
While stablecoins have been a topic of debate across the globe, Australian entities have been more supportive towards it and towards crypto in large. In February, the Canadian Securities Administrators (CSA) published a set of new requirements for crypto companies.
Under the new regulations, trading platforms will be prohibited from allowing customers to buy or deposit stablecoins without the CSA’s prior written consent, and to obtain that consent, companies must satisfy several due diligence requirements, including ensuring that the stablecoin is fully backed by an appropriate reserve.
Before that, in January, The Hong Kong Monetary Authority (HKMA), proposed a framework that will prioritize stablecoins that “purport to reference one or more fiat currencies” and will require issuers to back up their values with underlying reserve assets at all times. The HKMA’s approach to regulation will be “risk-based and agile,” and the regulator aims to restrict companies from deviating from their core business activities.