Last month, Australian digital payment 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 came to an end in May, and it is expected to publish a report soon. Novatti’s trial demonstrated the potential of CBDCs to provide a credible and risk-free asset for backing privately-issued stablecoins.
Nowadays, to ensure that stablecoins are fully backed, reserves must be regularly audited by third parties. However, this does not build a lot of confidence unless the reserves can be proven in real time as there have been past cases where stablecoins have been found not to be fully backed by sufficient reserves. CBDC-backed stablecoins could allow users to verify reserves independently, thus 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 which would need to be sold if there was a mass stablecoin redemption.
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