Australia marks first FX transaction using a CBDC as eAUD pilot continues

May 18, 2023 Coin Telegraph

Australia

The Australian digital dollar was used in a trade for a U.S. dollar stablecoin using an Ethereum layer 2 blockchain.

Australia has successfully made its first foreign exchange transaction using eAUD as part of a live pilot for the country’s potential central bank digital currency (CBDC).

It comes amid a rising interest from countries around the world to learn about or launch central bank-issued digital currencies.

In a statement, blockchain infrastructure provider Canvas said on May 17 local time, crypto fund managers DigitalX and TAF Capital traded eAUD against the stablecoin USD Coin (USDC).

Canvas reported the transaction was settled instantly and touted it as a success over what it called the “slow, expensive and prone to errors” traditional FX and remittance networks.

The FX trade was part of a series of tests currently underway as the country explores possible use cases for a CBDC. The pilot program was launched by the Reserve Bank of Australia (RBA) in conjunction with the financial research institute the Digital Finance Cooperative Research Centre (DFCRC).

Canvas’ test explored use of eAUD in tokenized FX settlements, which could point towards the benefits of using the CBDC over fiat currencies and existing settlement platforms.

We’ll demonstrate the benefits of using CBDCs like eAUD in tokenized FX transactions using our privacy-focused Layer 2 Network and blockchain-based financial markets applications. Read more here https://t.co/RPjSF5B8s0
— CANVAS (@canvas_defi) March 6, 2023

The transaction was done on a decentralized app on Canvas’ “Connect” — an Ethereum layer 2 that uses StarkWare’s zero-knowledge (ZK) roll-up technology.

Canvas’ CEO David Lavecky called the trade “historic” and added the digital dollar could potentially address challenges in FX and remittance markets such as “improving transaction times, reducing fees and providing more open access.”

An April pilot test from Australia and New Zealand (ANZ) bank used the CBDC to trade carbon credits.

ANZ used eAUD to back its A$DC stablecoin to trade the credits on a public blockchain and reported the settlement happened “in near real-time.”

Other use cases being tested include offline payments, distribution, custody, tax automation, use in “trusted Web3 commerce” and even livestock auctions.

The pilot started on Mar. 31 and is set to finish on May 31. A report and assessment of the various use cases are set to be published on Jun. 30.

Magazine: Here’s how Ethereum’s ZK-rollups can become interoperable

Aussie ‘Big 4’ bank mints stablecoin for carbon trading and remittances

January 19, 2023 Coin Telegraph

AUDN

This marks the second "Big 4" bank in Australia to launch an Australian-dollar pegged stablecoin in a bid to boost the digital economy.

National Australia Bank (NAB) is set to become the second “Big 4” Australian bank to launch an Australian dollar-pegged stablecoin on the Ethereum network.

Set to launch sometime in mid-2023, the AUDN stablecoin is aimed at streamlining cross-border remittances and carbon credit trading, according to a Jan. 18 report from the Australian Financial Review (AFR).

NAB’s chief innovation officer Howard Silby said the decision to mint the AUDN stablecoin on Ethereum — which is backed 1:1 by the Australian dollar (AUD) — was based on their belief that blockchain infrastructure will play a key role in the next evolution of finance:

We certainly believe there are elements of blockchain technology that will form part of the future of finance [...] From our point of view, we see [blockchain] has the potential to deliver instantaneous, transparent, inclusive, financial outcomes.”

The implementation of AUDN for real-time, cross-border remittances could become a way for customers to sidestep the slower and more costly SWIFT payment network.

Carbon credit trading and other forms of tokenzied real-world assets will also be a major use case for the AUDN, Silby said. He also added that they’re planning to offer stablecoins in “multiple currencies” where the bank has licenses.

NAB’s announcement of the AUDN comes nine months after rival bank Australia and New Zealand Banking Group (ANZ) launched 30 million tokens of its own stablecoin tickered A$DC in March 2022, which is also used for international remittances and carbon trading.

Prior to ANZ and NAB’s stablecoin projects, the two banks initially planned on teaming up with the other two “Big 4” Australian banks — Commonwealth Bank of Australia (CBA) and Westpac — to co-launch a nationwide stablecoin backed by the AUD.

However, it failed due to competition concerns and the banks being at different stages in their adoption and strategy, the AFR explained.

*NAB, one of the “Big 4” banks in Australia, is set to roll out its own stablecoin in mid-2023. Source:* *PYMNTS.*

Jonathon Miller, Australia’s managing director of crypto exchange Kraken Australia told Cointelegraph that banks are beginning to acknowledge the technical advantages that blockchain infrastructure offers over traditional legacy systems:

“The persistent adoption of crypto technology by financial institutions like ANZ and now NAB for its potential to create significant efficiencies in the financial system [...] is an explicit recognition of [blockchain’s] 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,” he added.

It also remains to be seen how these private bank-issued stablecoins would work in tandem with the Reserve Bank of Australia’s eAUD — a central bank digital currency (CBDC) — which is currently in its pilot phase.

However, NAB is confident the two will be able to operate simultaneously and have their own set of unique use cases.

Australian CBDC receives unexpected interest but could hurt banks: RBA

December 8, 2022 Coin Telegraph

Coin Telegraph

The pilot "eAUD" program is unique in that the Reserve Bank of Australia has not proposed use cases, and has received numerous suggestions from the industry.

A Central Bank Digital Currency (CBDC) pilot program in Australia has received more than 140 use case proposals from the finance industry, but the Reserve Bank of Australia (RBA) warns that it could displace the Australian dollar and result in people avoiding commercial banks entirely.

The RBA released a speech on Dec. 8 to be given by Assistant Governor Brad Jones at a central bank conference held from Dec. 8 to Dec. 9 local time, in which Jones speaks at length about what effect a CBDC could have on the Australian economy.

Jones notes that the RBA has been surprised by the industry interest they have received since releasing a white paper on Aug. 9, with over 80 financial entities proposing use-cases covering many areas such as e-commerce, offline, and government payments.

The team working on the pilot “eAUD” program is working out which of the proposed use-cases to take into its pilot phase early next year, and is expecting to publish a report on the project around the middle of 2023.

Jones also discusses the potential risks that are associated with an Australian CBDC, and points to liquidity issues and other issues the banks could face if a CBDC becomes the preferred source of holdings.

For example, with deposits of Australian residents such as savings accounts now making up over 60% of total funding for their banks, enough Australians choosing a CBDC over the Australian dollar could result in banks not having sufficient capital to lend to consumers, which in turn would make it harder for the RBA to transmit monetary policy, he said.

*Funding composition of banks in Australia. Source: RBA*

Jones also notes that Australians preferring to hold their funds in a “risk-free'' CBDC could lead to bank runs, with Australians withdrawing deposits en masse.

However, the Assistant Governor suggests CBDCs could also provide Australians with many benefits, such as privacy benefits — arguing that the central bank has no incentive to use personal data which can be exploited by private organizations — and could help safeguard monetary sovereignty that may be lost if a stablecoin or foreign CBDC fills a domestic vacuum.

He also points to the potential for offline transactions to increase the resilience of existing payment systems, in addition to increased efficiency and cost reductions for end-users.

Jones finished the speech by adding that Australians should be confident the Reserve Bank will continue to issue banknotes “for as long as they place value on them as a public good.”

Critics are often concerned that the introduction of CBDCs will end with banknotes being phased out however, a fear which is given credence by Nigeria’s move to further limit cash withdrawals on Dec. 6 following the issuance of the eNaira.

Digital assets could add $40B a year to Aussie GDP: Tech Council report

November 30, 2022 Coin Telegraph

Digital assets could add B a year to Aussie GDP: Tech Council report

Chalmers

A clear principles-based regulatory approach to the digital assets sector could be a huge benefit to the Australian economy according to the report.

Up to $40 billion a year (AU$60 billion), could be added to Australia's national GDP with the right regulatory framework and could lead to enormous cost savings for consumers and businesses according to a new report.

The Nov. 29 Digital assets in Australia report was commissioned by the Tech Council of Australia (TCA), one of the country's technology industry advocacy groups, and written by technology consulting firm Accenture, which outlined a number of potential benefits the growth of the digital assets sector in Australia could deliver, stating:

“Digital assets (DA) have the potential to transform our lives offering significant time and cost savings to individuals and businesses”

The report estimates digital assets — such as cryptocurrencies, stablecoins, tokens, and Central Bank Digital Currencies (CBDCs) — could deliver an “80% reduction in retail payments costs by 2030,” save Australian businesses 200 million hours per year by automating tax compliance and administration, and a further 400,000 hours in preparing documents for business loans.

*Potential economic and social benefits of the digital assets sector in Australian dollars. Source: Digital assets in Australia 2022 report.*

It also points to potential savings for consumers of almost $2.7 billion per year (AU$4 billion), or $107 (AU$160) per person, if they use digital assets for international transactions while suggesting that an instant settlement of business transactions could be hugely beneficial for the 4,000 businesses that fail each year due to cash flow issues.

Decentralized Autonomous Organizations (DAOs) are referred to in the report as a way to build public trust by making decisions, transactions, and procedures “automated and transparent,” with all members of the organization granted equal rights through the issuance of utility tokens.

It also mentions that to fully unlock the potential of DAOs, the government needs to clarify the legal status of DAOs including the liability implications for its members after participants of the Ooki DAO were charged by American regulators.

The report estimates “up to 100% of payments” could be facilitated by digital assets if a retail CBDC is introduced, pointing to the rapid uptake of retail CBDCs in other countries such as the e-krona in Sweden.

On Sept. 26, the Reserve Bank of Australia (RBA) — Australia’s central bank — released a whitepaper detailing the minting and issuance of an Australian CBDC, called the eAUD, which would be issued as a liability to the RBA. The pilot project is set to commence in 2023.

The report aims to help the government regulate the sector in a way that enables innovation while protecting consumers, and follows a promise from a spokesperson of Australian Treasurer Jim Chalmers — prompted by the downfall of FTX — that regulations would be coming in 2023 which aim to protect investors while still promoting innovation.

According to a Nov. 14 report from the Australian Financial Review (AFR), 30,000 Australian investors and 132 companies have funds locked up with FTX.

Australia Issues White Paper for Central Bank Digital Currency

September 28, 2022 Bitcoin.com

eAUD

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