essential catalyst for cross-border payments

The digital revolution has propelled businesses to new horizons, and at the heart of this transformation, blockchain is emerging as the driving force that is redefining the future of payments.

Developed from 2008, blockchain is a technology for storing and transmitting information. It offers high standards of transparency and security because it operates without a central control body. It allows its users – connected to a network – to share data without an intermediary.

Institutional initiatives such as that of JP Morgan Chase (JPM Coin) or Citigroup (Citi Token Services) also illustrate the growing adoption of blockchain technology by traditional finance. In 2020, the French Federation of Blockchain Professionals reported that more than half of SBF 120 companies are engaged in blockchain projects. This marks a significant shift in how businesses approach digital currency payment challenges.

1. Major issue: payment in Digital Currencies

The growing popularity of blockchain not only illustrates the transition to digital currencies, but also presents many challenges and opportunities. Managing additional cash flow and payments in digital assets are crucial aspects to consider. Often slow, opaque and costly, international transactions find in digital currencies a solution to simplify their processes. Blockchain is positioned as a powerful transformation engine, enabling secure authentication of the payer and beneficiary, guaranteeing security and confidentiality. The case of JP Morgan, which has forged a specialty in payments via blockchain, illustrates these issues well: the bank took an early interest in blockchains and launched its “JPM Coin” in February 2019. In 2018, it was one of the first to develop its first blockchain-based payment network, called Quorum; since supplemented by Onyx, a blockchain infrastructure making Siemens group transactions easier and more efficient.

The emergence of digital currencies in the SBF 120 is not limited to simple interest; it is a response to the growing needs of businesses. If the management of financial flows is often perceived by companies as a rather heavy, complex and sensitive subject, technology then becomes an opportunity to optimize these processes. Payments in digital currencies introduce a new dimension to international transactions, requiring businesses to adapt quickly to remain competitive. Blockchain, by simplifying these transactions, paves the way for increased operational efficiency.

2. High costs, long delays: blockchain as a transformative solution

Cross-border payments, which are typically costly, slow and error-prone, represent a major challenge for businesses. The global payments infrastructure, governed by an aging banking engine, faces complex coordination among multiple intermediaries, disparate regulations and compliance requirements. This situation creates a gap between customer demand and the company's ability to provide appropriate solutions, leading to cash flow problems. A somewhat ludicrous observation at a time when, in comparison, players like Amazon practice “instant” delivery, within the hour or within the day. In this sense, the integrated authentication and the intrinsically high level of security of blockchain technology position it as an essential solution to overcome these obstacles.

When diving into the complexities of cross-border payments, the challenges reveal themselves to be considerable logistical and regulatory barriers. Time zones, bank opening hours, exchange rate fluctuations to which are added in particular the issues linked to the low liquidity of currencies in emerging countries or even the inflation of certain currencies (Argentina/Lebanon) complicate these transactions. A traditional international transfer can take anywhere from four days to several weeks (if going to emerging countries), causing significant delays. Companies, aware of this gap between demand and operational reality, are faced with cash flow problems that directly impact their crucial transactions. Blockchain, through its decentralized nature and its ability to eliminate intermediaries, addresses these problems head on. It doesn't just solve problems, it revolutionizes the way cross-border payments are thought about.

3. The need for a solid regulatory base

The recent fall of Sam Bankman-Fried, an emblematic figure in the world of cryptocurrencies at FTX, and the resignation of the CEO of Binance mark a decisive turning point in the industry. These events caused significant turmoil, underscoring the critical importance of robust governance. In this changing context, regulation, once perceived as an obstacle, is emerging as a fundamental component for the adoption of blockchain in the business environment.

This change in perspective is also palpable in the traditional financial sector. Institutions, initially reluctant to adopt emerging technologies like blockchain, now recognize the imperative for transparent and well-defined regulation. This awareness marks a major evolution in the approach to regulation: it becomes a guarantee of legitimacy and trust for blockchain technology. Trust, essential for widespread adoption of this technology, depends largely on the existence of a clear and consistent regulatory framework. In this dynamic, all market players, whether already involved in the use of blockchain or not, are encouraged to comply with regulatory standards. This compliance is crucial to ensuring the integrity and legitimacy of the entire blockchain ecosystem. A well-structured regulatory framework acts as a catalyst, thereby strengthening business confidence in this innovative technology.

Moreover, the recent adoption of the MiCA regulation (“Markets in Crypto-Assets”) by the European Parliament illustrates this trend towards stricter regulation of crypto-asset markets in Europe. This regulation aims to protect investors while preserving financial stability, promoting innovation and strengthening the attractiveness of the sector. It establishes a harmonized regulatory framework within the European Union, a notable improvement over previously disparate or poorly developed national legislation.

Blockchain is positioned as the essential driving force that is redefining the future of cross-border payments. By embracing this revolution, businesses are opening the door to an era of more efficient, reliable and transparent cross-border payments. This transformation has only just begun, but it is inevitable, charting a future where blockchain is at the heart of international transactions, propelling businesses to new heights of efficiency and trust. Its impact will be felt not only in payments, but also in the way companies design and conduct their operations on a global scale.

*The MiCA Regulation will protect investors by strengthening transparency and putting in place a comprehensive framework for issuers and service providers that will also ensure compliance with anti-money laundering rules. The new rules apply to issuers of utility tokens, asset-referenced tokens and “stable cryptocurrencies”. They also apply to service providers such as trading platforms and wallets where cryptoassets are held.

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