Novatti’s eAUD trial shows potential of CBDC-backed stablecoins – Ledger Insights

Novatti’s eAUD trial shows potential of CBDC-backed stablecoins – Ledger Insights


Last month, Australian digital payments company Novatti completed its central bank digital currency (CBDC) trial using a stablecoin backed by the eAUD CBDC. The test was part of the country’s CBDC pilot program, which officially ended in May, and is expected to publish a report soon. Novatti’s trial demonstrated the potential of CBDCs to provide a credible and risk-free resource to back privately issued stablecoins.

Novatti’s CBDC trial

Today, to ensure that stablecoins are fully supported, reserves must be regularly audited by third parties. However, this does not build much confidence unless the reserves can be proven in real-time, as there have been previous cases where stablecoins are not fully backed by sufficient reserves. CBDC-backed stablecoins can allow users to independently verify reserves, thereby increasing trust in the system.

Additionally, because a CBDC comes directly from the central bank, it should be more liquid than reserves held in government bonds that would have to be sold if there was a mass redemption of stablecoins.

During the trial, Novatti purchased eAUD from an authorized distributor and minted a corresponding amount of “wrapped” stablecoins on the public Stellar Blockchain. A Hashed Time Lock Contract (HTLC) was used to bridge the CBDC ledger and the Stellar blockchain. This ensured that Novatti continuously had one-for-one backing, which users could check independently at any time. The stablecoins were then used to purchase NFTs issued by Zerocap for a charitable donation to the FSHD Global Research Foundation.

“In Australia, some charitable foundations lack transparency,” said Natalie Cooney, Chair of the FSHD Global Research Foundation. “Donors deserve trust when they support a cause, and I’m proud of the FSHD Global Research Foundation’s commitment to transparency and impact. eAUD offers a solution because you can track your donation, show proof of receipt, and even be able to continue to show the direct impact on the cause .Zerocap provides the ability to receive the funds in our insured escrow wallet, supporting the digital asset ecosystem, and I am excited to see Novatti driving innovation in digital payments.”

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Australia’s public blockchain affiliation

One thing worth highlighting is Australia’s willingness to link a CBDC to public blockchains, something few others have done. Brazil’s Digital Real Challenge also involved public blockchains. Australia has generally shown a greater inclination towards public blockchains, with several use cases testing such applications.

Australia’s public blockchain affinity also extends beyond the CBDC trials. In recent years, both ANZ and National Australia Bank have piloted blockchain-based stablecoins, again something few banks elsewhere have attempted.

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