Blockchain technologies are connecting global financial
systems so they are easily interoperable, efficient, affordable and accessible.
This can reduce the cost and time of cross-border payments.
Confidence in blockchain technologies are rising as more governments
and businesses invest in these areas.
What's wrong with cross-border payments today?
It’s no secret that the cross-border payments landscape
using traditional rails is fraught with fees, hurdles and delay. Individual
senders incur outsized fees for the billions of dollars sent in personal
remittances every year. Global businesses choose between bearing an FX cost or
passing that cost onto their customers. And all of those involved must wait
days or weeks to complete transactions. The bottom line: sending money via
traditional rails is far from a borderless experience.
Part of the problem is that systems are not interoperable.
To send money to different corners of the world without blockchain, a whole
patchwork has been haphazardly knitted together over the decades to achieve
some semblance of financial interoperability between financial institutions,
correspondent banks and money transfer operators along the value chain.
Connecting these disparate systems, particularly in underserved markets, where
the local currency is not globally traded, has created friction that results in
long delays and high fees at each link of this chain.
Just last year, the G20 made enhancing cross-border payments
a priority, citing the benefits a faster, cheaper, more transparent system
would deliver for citizens and economies worldwide, and increasingly, global
policymakers recognize that blockchain technology can solve the problem posed
by outdated financial infrastructure.
But the solution isn’t just within sight — the solution is
here. Blockchain technology is delivering on its promise with seamless
cross-border payments today.
A global public network
Blockchain technology is showing that we can connect
financial infrastructure so that no matter where you are in the world, systems
and forms of value can interoperate with each other.
Stellar, a global, public blockchain that is built for
interoperability and to further financial access and inclusion, has a network
of more than 20 anchors around the world who are integral parts of connecting
global financial systems. These anchors are regulated financial institutions,
money service businesses, or fintech companies that issue 1:1 backed fiat
tokens (also known as stablecoins) and/or provide a fiat on/off-ramp. The goal
is to open markets to new remittance and payments corridors, like between
Europe and Nigeria, Africa’s largest Sub-Saharan remittance market.
For example, Cowrie Integrated Systems, a financial
technology company with headquarters in the United Kingdom and offices in
Nigeria, provides value-added services over electronic payment networks. Given
recent guidance out of the Central Bank of Nigeria, Cowrie designed a payment
channel to leverage USDC, one of the world’s leading digital dollar
stablecoins, as a bridge currency to help businesses reduce the friction of
sending payments to and from Europe.
Working with Tempo, an electronic payment institution based
in France and the issuer of EURT, a euro stablecoin also pegged 1:1 to fiat
reserves, they are developing a bi-directional channel for customers to redeem
and trade these tokens right away. This resulted in savings in terms of costs
and time and showed the power of connecting global financial systems so they
are easily interoperable, efficient, affordable, and most importantly,
accessible.
Openness, innovation and interoperability
Once we recognize that the blockchain future we’ve all been
dreaming about is actually here, right now, we have to ask ourselves whether we
are creating long-term solutions
Open networks allow innovation from the many rather than the
few. Open networks ensure that anyone can build upon, improve and challenge the
technology and push the market to consider the next idea. Open networks promise
interoperability and allow for continual ideation and progression. If we were
to start building this technology in a silo, on closed networks that can’t work
together, we would risk putting ourselves right back where we started. By
working together in the open to connect traditional financial rails with
digital ones, we can reap the benefits and work through shared challenges.
Making blockchain mainstream
Confidence in this technology, especially for digital
currencies, is growing across the board. Governments are accelerating their
work on Central Bank Digital Currencies. Businesses are building and investing,
with the vast majority of global executives surveyed by Deloitte last year
saying they believe digital assets will be important to their industries within
the next three years.
But the benefits of innovation, especially in the financial
sector, cannot be gained at the expense of additional risk to consumers.
Central banks and regulators, entrusted with the duty to protect consumers,
draft and enforce regulations guided by that lofty responsibility. But, as the
Tempo-Cowrie example demonstrates, deployed correctly, blockchain technology
can be leveraged to benefit consumers without sacrificing oversight,
accountability or regulation.
This is why it is all the more important for us to
demonstrate to stakeholders what a difference this technology can make for
consumers, citizens and businesses, boosting local and national economies - and
how the technology can be subject to regulatory oversight. This is why it is
critical for the private sector to engage with governments to ensure that new
regulations balance the need for new and improved financial rails with the need
to guard against innovations that empower illicit actors. The desire to get
this right is shared by all stakeholders and it's by working together that we
will achieve that balance.
Blockchain is real and actionable today, ready to tackle not
only cross-border payments but many of the most meaningful, impactful financial
use cases for citizens, consumers, governments and businesses. Now, with a
concerted public-private partnership, we can take it mainstream.
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