ANZ celebrates launch of its digital ‘stablecoin’, putting the bank’s reputation behind a cryptocurrency revolution

ANZ is celebrating the launch of Australia’s first bank-backed ‘stablecoin’, an innovation advocates believe could fundamentally change how local businesses and investors transfer large sums of money online.

On Thursday, ANZ revealed it has teamed up with blockchain partner Fireblocks and digital asset management firm ZeroCap to create A$DC, a cryptocurrency whose value is stapled to that of the Australian dollar.

Unlike other cryptocurrencies, where values fluctuate in line with demand and liquidity, stablecoins are pegged to the value of real-world assets, like hard currency or precious metals. 

ANZ said it minted $30 million worth of A$DC using a smart contract based on the Ethereum system.

The A$DC was transferred to digital commodity trading platform Zerocap on behalf of Melbourne’s Victor Smorgon Group.

The permissionless transaction took place “in seconds”, a ZeroCap spokesperson said. The A$DC holdings were then transferred back into traditional fiat currency.

Advocacy groups like Blockchain Australia say stablecoins can offer businesses and investors predictable access to digital asset classes.

The clue is in the name. Instead of exposing investments to the tumultuous movements of Bitcoin or Ethereum, stablecoins are billed as a stable store of digital wealth.

Unlike traditional finance, cryptocurrency settlements can take place in mere moments, and blockchain adherents say permissionless payments — that is, transactions that are verified by the blockchain itself, instead of centralised systems — have a marked efficiency advantage.

Australian dollar-backed stablecoins also cut down on the foreign exchange risk posed by companies and investors channeling their local currency into stablecoins pegged to the US dollar or British pound.

The notion of a widely used Australian dollar-backed stablecoin also opens the door to everyday payments made using blockchain assets, above and beyond the few retailers that accept Bitcoin or Ethereum for their goods and services.

An emerging sector

While stablecoins pegged to the Australian dollar are not a new development, ANZ’s role in the creation of A$DC could also change how investors and businesses view the burgeoning sector. 

ANZ banking services lead, Nigel Dobson, said the A$DC trial run represented a “first and important step in enabling our customers to find a safe and secure gateway to the digital economy”.

But even with the blessing of one of Australia’s most significant financial institutions, A$DC has not entered a fully-formed regulatory environment, and the broader business community is unlikely to adopt stablecoins until stronger guardrails are enforced.

A March YouGov poll found around four in five Australian CEOs, managing directors and senior leaders were likely to accept cryptocurrencies as payment or as an investment vehicle after the launch of a “proper regulatory regime.”

The Morrison government is currently seeking input on the shape of Australia’s regulatory framework, and lawmakers like Senator Andrew Bragg have indicated a desire for Australia to become a world leader in digital currencies and blockchain technology.

The Reserve Bank of Australia has also indicated its support for regulation over stablecoins.

For now, A$DC serves as a compelling test case — and as bragging rights for ANZ.