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ANZ mints first stablecoin pegged to the Australian Dollar

ANZ mints first stablecoin pegged to the Australian Dollar

Big four bank, ANZ, has made history today by creating the first stablecoin pegged to the Australian dollar, encouraging its customers to support cryptocurrencies.

ANZ is the first Australian bank to mint a digital asset linked to the value of the AUD, the A$DC. And it’s already been used in a real transaction, allowing Victor Smorgon Group to send $30 million to a digital asset fund manager, Zerocap, within 10 minutes. Typically, this transaction would take several days.

According to ANZ, it was able to mint 30 million worth of A$DC using an ANZ built Ethereum Virtual Machine compatible smart contract deployed through the Fireblocks platform. These coins were transferred between the parties and later redeemed back into Fiat currency.

ANZ Banking Services Lead Nigel Dobson said: “An ANZ issued Australian dollar stablecoin is a first and important step in enabling our customers to find a safe and secure gateway to the digital economy.”

“Stablecoins are a new way for customers to transact and in this case was an efficient and direct way for Victor Smorgon Group to access Zerocap’s digital asset exchange and move funds across a decentralised network.”

“We’re excited to continue to trial our capability and explore how this use case can be applied in other industries and customers in the future,” said Mr Dobson.

ANZ worked closely with leading providers in the digital asset domain including Fireblocks, Chainalysis and OpenZeppelin to create an ‘in-house purpose-built stablecoin smart contract’.

Fireblocks CEO Michael Shaulov said: "The financial sector is undergoing rapid transformation and we are enabling institutions with end-to-end technology for plugging into tokenisation, DeFi, staking and crypto trading.”

“By being the first bank to mint a stablecoin, ANZ has established itself as a leader when it comes to innovation and we look forward to welcoming other institutions who are on the same path,” said Mr Shaulov.

It’s likely that other major banks will follow suit in developing their own forms of stablecoins or other cryptocurrencies.

What is a stablecoin?

Cryptocurrencies like Bitcoin can struggle with high volatility in their valuations. During January 2018 – June 2019, the price of Bitcoin moved around 2.67% a day, with daily price swings as high as 16% on the upside, and over 18% on the downside. This volatility is six times higher than that of Fiat currencies, like the Australian dollar.

A stablecoin is a cryptocurrency in which the priced is pegged to an external reference to help provide more price stability. It may be connected to exchange-traded commodities, such as gold, or to a currency. In this instance, the A$DC is pegged to the Australian dollar.

Popular types of stablecoins can include:

  • Fiat-collateralised stablecoins – pegged to a Fiat currency, such as the U.S. dollar or the Australian dollar.
  • Crypto-collateralised stablecoins – backed by other cryptocurrencies
  • Non-collateralised (algorithmic) stablecoins – rely on a working mechanism like a central bank would to retain a stable price.

They may be an appealing “best of both words” crypto option for some investors, as it may offer the privacy of cryptocurrencies with the stable valuation of Fiat currencies.

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This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

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