A$DC Pegs With Australian Dollar As ANZ Bank Mints First AUD Stablecoin

The vast majority of the industry in Australia makes use of non-bank, frequently unregulated USD stablecoins, but the narrative has now changed that the Big 4 banks have released an AUD stablecoin.

Banks from the Big Four ANZ have become the first Australian bank to issue an “A$DC” stablecoin tied to the Australian dollar (AUD).

However, competitor bank NAB is working on a stablecoin project that will launch before the end of the year.

ANZ is working with local regulators such as AUSTRAC and APRA to get the project approved in a compliant manner and has already completed a test transaction on the Ethereum blockchain with its institutional partner Victor Smorgon Group, the billionaire Smorgon family’s family office.

The stablecoin will initially be pushed out for institutional clients seeking a cost-effective on-ramp for crypto investments, according to a March 24 article from the Australian Financial Review (AFR), but it is expected to be opened up to the civilian trading market soon as well.

Victor Smorgon sent A$DC worth $22 million (A$30 million) to Zerocap, an Australian digital asset fund manager that has teamed with ANZ to provide critical infrastructure and consulting services.

The infrastructure was provided by Fireblocks, a worldwide digital asset custodian, and the smart contracts were audited by OpenZepplin. Chainalysis has agreed to help with regulatory and compliance duties.

In a statement, Zerocap CEO Ryan McCall stated that the ANZ’s action is a “major milestone” in the mainstreaming of crypto in Australia, as well as globally because it presents a credible example of a stablecoin backed by a fully regulated, compliant, and traditional financial institution:

“Until A$DC we’ve not had a bank-backed Aussie dollar stablecoin, and most of the industry utilizes non-bank and often unregulated USD stablecoins. Now with this Big 4 bank-issued AUD stablecoin, the use case is a lot more compelling.”

ANZ’s institutional division “was enthusiastic and fully dedicated to this project, the ecosystem in general, and delivering an end-to-end solution and service,” McCall said of the A$DC pilot test. He refused to comment on what the major bank may do next.

ANZ would likely take its time weighing its alternatives, he added, adding that the distributed ledger technology (DLT)-based Hedera is also being considered.

“The move to ETH2 and beyond will be critical. Hedera and others are in the mix here, including from an ANZ standpoint, so it’s not a sure thing for Ethereum,” he said.

Shortly, the Big 4 banks will try to become major direct on-ramps/off-ramps to crypto, according to McCall.

A digital Aussie currency issued by a bank, according to Nigel Dobson, ANZ’s banking services portfolio lead, will advance the local digital asset economy.

“Our customers want to buy digital assets and seeing a digital Australian dollar minted by a large ADI [authorized deposit-taking institution] like ANZ will make them confident they can transact with us, and use the coin domestically. This means they don’t have to flip in and out of US dollar coins, taking exchange risk in an elongated process.”

After NAB executive of innovation and partnerships, Howard Silby stated during the Australian Blockchain Week event that “banks are starting to have a mainstream blockchain moment,” ANZ isn’t the only local bank working on introducing a stablecoin.

NAB is developing a stablecoin to settle transactions on its DLT-based carbon credit network “Carbonplace,” which is expected to launch at the end of 2022, according to Silby.

“The stablecoin component is incredibly critical to ensure that both portions of the transaction can all be on-chain, and that’s another interesting development we’re working on right now,” he added, adding that:

“We’ve done trades, but we’ve had to settle partly in fiat. So the big breakthrough will be later this year when we have a stablecoin and we can do the whole thing on-chain.”