According to a recent study, cryptocurrency can supplement traditional banking by serving as a “good alternative” to present settlement systems.
According to the International Association of Money Transfer Networks (IAMTN), remittances can be instant due to the potential to eliminate intermediaries such as banks, resulting in cheaper costs.
Notably, the findings are supported by prominent industry participants interviewed by IAMTN on novel technologies with the potential to improve cross-border payments. Surprisingly, the stakeholders stated that blockchain and cryptocurrency had “unlimited prospects” to improve cross-border settlement.
The usage of cryptocurrencies for transaction settlement can be a viable alternative to traditional settlement systems. This is due to the ability to settle transactions quickly on a blockchain, eliminating the need to go via the correspondent banking system, which has limited operating hours and significant processing periods.”
Cryptocurrencies for transaction settlement. Image: D-Keine / iStock.com
Blockchain’s role in payments
IAMTN specifically said that the necessity to investigate blockchain technology is needed by the decline in correspondent banking connections and the surge in cross-border payment volumes.
According to the report, despite the advertised benefits of blockchain in payments, it is still unclear which use case for the technology employed in remittance is the best.
IAMTN recognised open application programming interface (API) and artificial intelligence (AI) as major technologies that can improve international settlements and blockchain.
Regulatory impediment
It’s also worth noting that the survey highlighted that industry participants are striving to integrate blockchain into their systems but have run across various roadblocks, with laws topping the list. Tight rules exist in certain locations, while others lack clear standards to control the incorporation of new technology, resulting in ambiguity.
Overall, the requirement to keep up with regulatory environments worldwide can make compliance with rules costly and difficult for financial organisations. Difficulties arise, particularly when regulation does not keep pace with technological changes.
Other issues include a lack of accessibility, awareness, literacy, and trust in new technologies, with the report urging policymakers to expedite the regulatory process to ensure clarity in the space.