A recent industry paper found that DeFi can reduce costs and enhance transparency in foreign exchange (FX) markets. The paper concludes that on-chain FX, along with improved fiat-to-stablecoin conversion and improved user-friendly interfaces, enables faster and less costly transfers. The paper reportedly estimated that DeFi rails could reduce international money transfer costs by up to 80 percent. According to the paper, additional benefits of on-chain FX exchange and settlement include (1) eliminating settlement risk when one side of the transaction settles without the other; (2) reducing risks of benchmark rigging and market manipulation; (3) facilitating liquidity and market depth, and reducing risk of flash crashes; and (4) improving payments with nearly instantaneous and low-cost cross-border settlements.

In other news, this week the National Australia Bank announced that it will launch a stablecoin to be backed by the Australian dollar on the Ethereum and Algorand blockchain networks. This is reportedly the country's second major financial institution to launch a stablecoin, after Australia and New Zealand Bank minted A$DC last year. The stablecoin is expected to allow customers to settle transactions in real time on the blockchain using Australian dollars. Australia reportedly pledged to "modernize the country's financial system and update its regulatory framework to crypto and other innovations" under Prime Minister Anthony Albanese, and the country's central bank is anticipating its pilot central bank digital currency (CBDC) project to be completed by mid-2023.

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