National Australia Bank has become Australia’s second major bank to create a ‘stablecoin’.

Reports say NAB is preparing to launch new digital tokens called AUDN to allow customers to settle transactions on blockchain technology in real-time using Australian dollars. 

It comes nine months after rival ANZ created a similar product, known as A$DC.

Stablecoins represent an attempt to mitigate the volatility of many cryptocurrencies by linking value to a real currency. They are seen as a way to realise the efficiencies of blockchain technology, especially with regard to settlement processes, as they allow payment and transfer of digital assets to occur at the same time. 

Australia’s big four banks attempted to set up an industry-wide Australian dollar stablecoin last year, but reports say the effort failed due to competition concerns and differing crypto strategies within the banks.

Regulators are taking notice, with Reserve Bank governor Philip Lowe last month saying stablecoin regulation must be a priority, suggesting they should be treated like bank deposits.

“We can envisage a possible future in which stablecoins are used for payments, as long as they are well-designed and well regulated. In many ways, the regulatory issues are similar to some stored value facilities, such as pre-paid travel cards and digital wallet services,” the governor said.

Banks believe stablecoins can help avoid volatile cryptocurrencies and the constant transferring of funds in and out of crypto exchanges, which creates counterparty risk. 

“We certainly believe there are elements of blockchain technology that will form part of the future of finance,” NAB chief innovation officer, Howard Silby, said this week.

“That continues to be the source of some debate. But certainly, from our point of view, we see [blockchain] has the potential to deliver instantaneous, transparent, inclusive, financial outcomes.”

The main focus of NAB’s AUDN is expected to be its use as a settlement token, as it should allow for all elements of multiple, linked transactions between multiple parties to be settled simultaneously.