As digital wallets users in Australia have doubled in the last three years, the need to adapt traditional banking systems around digital currency is being explored by the Reserve Bank of Australia, with a use case presented by digital payments company Novatti Group (ASX: NOV) centring around their AUDD stablecoin.
The presentation by Novatti was part of the RBA’s Digital Finance CRC initiative, which brings together Australian banks and fintechs to explore a possible Central Bank Digital Currency (CBDC) in Australia. Novatti’s presentation illustrated how a CBDC would provide risk-free and credible backing to its stablecoin, as well as transparent independent verification by the customer.
Novatti’s involvement in the CBDC project not only strengthens the credibility and real-life applicability but also amplifies the flexibility and robust governance that can be implemented. This inclusion builds upon their current rollout of AUDD stablecoin, which maintains a 1:1 backing by Australian Dollars.
AUDD fits into the Novatti ecosystem as a digital payments product that can facilitate cross-border transactions at just a fraction of the cost and time it would take to make the same transaction via traditional banking systems. However, as digital wallet adoption has continued to gather momentum, AUDD can also be used for payments, is Web3 ready, and can be applied in scenarios where trust and traceability of transaction flow is critical.
For their use case, Novatti Head of Blockchain and Digital Assets, Michaela Juric, showcased an example whereby Novatti purchased 5,000 eAUD (the CBDC issued by the RBA) and minted an equivalent amount of its stablecoin eAUDD.
The eAUDD was used to buy a non-fungible token (NFT) in order to make a live charitable donation where all processes to facilitate the transactions were recorded and traceable on the blockchain.
“The use case for this is to provide trust and transparency to how a stablecoin is backed. As we’ve recently seen from instances of Terra Luna, it’s difficult to ensure that a stablecoin is sufficiently backed and what a user is actually getting into,” said Juric.
“As such, we’ve utilised the CBDC to back the stablecoin which provides not only a transparency aspect by querying the RBA’s blockchain to validate that our stablecoin is actually backed, but also gives the user confidence in knowing that it is backed by central bank money as opposed to privatised money.”
Following the demonstration, Novatti CEO Peter Cook was featured in a lively panel discussion on the topic “Stablecoin vs CBDC” alongside leaders from NAB and fintechs Canvas and NotCentralised.
When questioned on the potential for a private stablecoin like AUDD, Cook highlighted how a CBDC-backed stablecoin could have real-world utility from cryptocurrency investors seeking more stability in their digital assets. With its traceability and ability for users to seamlessly transact internationally, Cook suggested that a CBDC-backed stablecoin could service the traditional investment world where Self-Managed Super Funds could utilise it for international investments.
“We are excited to demonstrate how Novatti’s AUDD stablecoin can work with CBDCs by eliminating existing barriers in the digital asset market and promoting the use cases for high governance digital payments in Australia,” said Cook.
“This trial has demonstrated the real-world utility of stablecoins that bridges the gap between fiat currency and digital assets. This is just the beginning of what we hope will be a greater usage in compliant stablecoins bringing faster payments with lower friction costs to consumers.”
The AUDD product is still in its infancy within the Novatti digital payments ecosystem, which is on track to process more than $4 billion in FY23. The Melbourne-based fintech has a strong presence within Australia’s cross-border payments sector as one of the leading providers of digital wallet payment options for customers and omnichannel payment gateways for merchants.
Trading Desk Assistant at Emerald Financial
Latest posts by Jack Cornips (see all)
- UNITH delivers eSocial Worker for public health services across 14 countries - December 5, 2023
- Novatti cashing out of Reckon investment, clears debt to simplify payments business - November 17, 2023
- Novatti seizes opportunity in Australia’s cashless transition as revenues rise while expenses drop - October 30, 2023
Leave a Comment
You must be logged in to post a comment.