Stablecoins set for key role in digital payment networks

14 Sep, 2022

By Effie Dimitropoulos, Executive General Manager

There is growing interest in Australia in the potential use of innovative technologies like stablecoins as a means of providing payment and settlement services for the retail sector, and for making payments across borders to businesses around the world.

During the COVID pandemic, online shopping and digital business-to-business transactions exploded and, along with it, the demand by these businesses to be paid swiftly and securely by their customers for the goods and services they sell globally.

The new AUDD stablecoin, which is fully backed by the Australian dollar on a one-for-one basis, has been developed to meet this demand for fast, efficient digital transactions, particularly within the retail sector where the interest continues to grow. 

The natural evolution 

We have been an innovator in the payments sector for over a decade now and already offer solutions such as mobile money systems, digital wallets, vouchers, and QR-coded payments so stablecoins, with all their additional blockchain features, are just a natural progression for us.

At Novatti we believe that digital currencies are simply the next step in the evolution of money and the next leap forward in payments innovation. Digital currencies enable businesses to pay and be paid swiftly and securely anywhere, and bring modern technology to bear in facilitating better, faster payments. 

Not just shopping money

Retail business transactions aren’t the only way to use this modern technology to facilitate better, faster payments. In addition to these payment gateways, we believe the AUDD will prove useful for making cross-border remittances, and in the newly emerging world of Open Banking. 

In the case of remittances, Novatti’s stablecoin has been designed so that it can be traded with other fiat currency-backed stablecoins efficiently and seamlessly. This immediately creates a faster and more cost-effective international remittance network because it can run autonomously, all day, every day. No more waiting for your bank to clear your transactions.

Novatti is also working with the Ripple Network, and has been for several years, supporting the development of a cross-border remittance sector for all digital tokens. This is helping to create a more efficient and streamlined solution for businesses to send money around the world. Inserting stablecoins into this mix allows for even more transparency from a cost perspective.

As part of our work with the Stellar blockchain network, transactions with the AUDD will include Know Your Customer (KYC) data, making it easier for us and our partners to comply with local and international Anti-Money Laundering (AML) requirements. Once fully developed, we will extend this to all our cross-border payments making the AUDD much easier for importers and exporters to use to make trade payments.

Open Banking 

We believe an Australian dollar stablecoin that can be accepted without the need for users to be involved with traditional banking institutions will also help many people regain access to the transactional world. It will allow holders to decide what they will use it for and where, enabling access to a greater range of financial products outside the traditional banking system.

Once established, the AUDD will also be perfect for use in donating to humanitarian aid in far flung places and in helping victims of financial abuse.

Regulation requirement 

At Novatti, we believe the private sector is most suited to developing products like stablecoins for use in the retail space, and recognise that the sector will need regulation to provide greater customer certainty, which is why we are positively contributing to the conversations on regulation.

Most new players in the fintech space and payment systems businesses share this desire for regulatory frameworks to be modernised to manage the risks and opportunities that are emerging. There is also a strong focus on fraud prevention and cyber resilience among payment service providers and operators of payment infrastructure.

At the current time, the Reserve Bank of Australia (RBA) is focusing its efforts on looking at ways of making wholesale cross border payments faster, cheaper and more transparent by using Central Bank Digital Currencies (CBDCs). 

The RBA’s project will involve the development of a limited-scale CBDC pilot that industry participants will be invited to engage with to show innovative and value-added use cases for a CBDC. The project is expected to take around a year, after which a report on the findings will be published.

According to Reserve Bank of Australia Governor Philip Lowe, the private sector is better placed to develop successful stablecoins linked to official currencies than government bodies – a view we wholeheartedly agree with.

Novatti shares in the RBA’s belief that digital currencies are the future of money and the next leap in payment innovation. The AUDD has been launched to meet this growing market demand and to provide a world of better customer experiences for anyone who makes a payment, anywhere, any time.