As global trade expands, the demand for seamless cross-border payment solutions is growing.
With talk of a ‘crypto winter’, we go back to the future of the underlying blockchain technology and its potential for financial services.
Following recent high-profile crypto scandals, trust in crypto is declining. The irony is, of course, that crypto was supposed to be trust-less. It put faith in computers and code, not governments and banks.
Crypto was born out of the 2008 financial crisis when trust in money, banks and governments was in short supply. In his paper Bitcoin: a peer-to-peer electronic cash system, Satoshi Nakamoto described how new digital money could be exchanged without trusted intermediaries.
Nearly a decade-and-a-half on, the crypto market is made up of more than 19,000 different digital assets and tokens. Yet talk about crypto as an asset class may have detracted from discussion about the underlying infrastructure. Specifically, the potential of blockchain to change the operating model for financial services, improving how people and businesses interact and transact.
Take payments, for example. Everyday domestic payments generally work well. Individuals and businesses have established ways of paying and being paid locally. But when it comes to international payments, that’s a different story.
Cross-border transfers take too long and cost too much. There’s uncertainty as to where the funds are and when they’ll arrive. That’s partly because international correspondent banking is complicated.
Behind the scenes, international transfers or remittances involve multiple intermediaries, nostro and vostro accounts, netting out and so on. Of course, a bank account is also needed to participate. This excludes 1.4 billion people worldwide, who don’t have one, according to the World Bank.
Blockchain offers an alternative rail. Transfers are international by default. They’re borderless but also permissionless. This means they’re available to everyone around the world with an internet connection and internet-capable device, which helps expand access to financial services.
Moreover, when combined with cryptography and smart contracts, self-executing protocols governed by explicit terms and conditions, blockchains enable improved use cases. These include transaction processing, digital ID, supply chain tracking, record keeping and regulatory oversight.
The United Nations, among others, is exploring the use of blockchain technology in achieving its Sustainable Development Goals (SDGs). First set in 2015, the 17 SDGs include ending poverty and hunger, improving education and equality, and are expected to be completed in the 2030s.
From blockchain-based remittances in Nepal to cash transfers to those impacted by the war in Ukraine. From the credit bureau of the future in Sierra Leone to blockchain-verified iris scans to aid Syrian refugees, UN agencies are combining blockchain technology with existing systems.
This is specifically to help improve the speed and scope of global disbursements, as well as increase transparency to prevent misappropriation of humanitarian aid.
Bringing blockchain ideas to life today can be complex and time-consuming, not to mention expensive. In a complicated, regulated space like financial services, you could quickly find yourself tied up in red tape.
There’ll always be a need to bridge traditional and blockchain systems. The right partner can make things as simple as possible for providers behind the scenes. And in turn as simple as possible for end-customers.
This includes real-time syncing of blockchain-based accounts via card and bank rails, plus acceptance at more than 30 million shops, businesses and ATMs worldwide via the card networks.
Monavate is a regulated entity in the UK and EU, able to give access to bank and card rails. We have a Swiss crypto licence and the risk appetite to partner with crypto firms. We’re open for blockchain and crypto business. If you’ve got a great idea, come speak to us.