# Why blockchain could represent the future of cross-border payments
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-01-09
Category: TECHNOLOGY
Category URL: https://financedigest.com/category/technology
Meta Title: Exploring Blockchain as a Solution for Cross-Border Payments
Meta Description: Discover how blockchain technology is revolutionizing cross-border payments with stablecoins and central bank digital currencies. Learn from MAS's
URL: https://financedigest.com/why-blockchain-could-represent-the-future-of-cross-border-paymentshtml

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_![Jorge Lesmes, Banking Director at NTT DATA UK&I](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/34-1736814606287-compressed.jpg)_

_By **Jorge Lesmes,** Banking Director at NTT DATA UK&I_

In October, the Monetary Authority of Singapore’s (MAS) Managing Director, Ravi Menon, explored the idea of blockchain networks as a solution for slow and inefficient cross-border payments during his keynote speech at Swift’s Sibos conference. I was pleased to hear that his suggestion integrated both stablecoins and central bank digitised currencies (CBDCs). It showed that he was keeping an [open mind to the wide array of options](https://www.financedigest.com/nexi-open-to-options-as-banco-bpm-seeks-partner.html "Nexi open to options as Banco BPM seeks partner") provided by cryptocurrency.

Whilst I was pleased, I was certainly not surprised. In recent years, [financial institutions](https://www.financedigest.com/the-future-of-financial-institutions-in-2023.html "The Future of Financial Institutions in 2023") across the globe have been eyeing stablecoins as a less volatile alternative to standard cryptocurrency. Especially after the pandemic, stakeholders of all sizes – from everyday investors to global players such as Wells Fargo and JPMorgan Chase – are exploring the [opportunities provided by investing](https://www.financedigest.com/private-equity-firms-hungry-for-investment-opportunities-but-business-owners-must-be-cautious-2.html "Private equity firms hungry for investment opportunities, but business owners must be cautious") in less traditional assets. However, they want to do so without the inherent [risk that comes with unpegged cryptocurrency](https://www.financedigest.com/over-half-of-organisations-would-consider-using-cryptocurrencies-for-business-transactions-though-8-in-10-acknowledge-the-increased-risk-of-associated-ddos-attacks.html "Over half of organisations would consider using cryptocurrencies for business transactions, though 8 in 10 acknowledge the increased risk of associated DDoS attacks").

For those who are unaware, it’s important to [explain exactly what we mean when we say](https://www.financedigest.com/saipem-shares-drop-group-says-cannot-explain-why.html "Saipem shares drop, group says cannot explain why") “stablecoin” and “CBDC”. Crucially, it’s also vital to understand how they might [operate across continental and perhaps even global networks](https://www.financedigest.com/how-can-network-operators-monetise-television-quickly-and-effectively.html "How can network operators monetise television quickly and effectively?").

**Is operating in the blockchain inherently risky?**

The first decentralized [cryptocurrency Bitcoin](https://www.financedigest.com/devere-officially-launches-cryptocurrency-app-with-bold-bitcoin-predictions.html "deVere officially launches cryptocurrency app with bold Bitcoin predictions") was released in 2009. Since then, the [financial world](https://www.financedigest.com/shakedown-on-horizon-for-financial-technology-world.html "Shakedown on horizon for financial technology world") has dramatically changed; and whilst the market has been hugely volatile, it is becoming increasingly clear that blockchain solutions are here to stay. The question is, is [blockchain risk](https://www.financedigest.com/mcafee-highlights-emerging-cybersecurity-risks-associated-with-blockchain.html "McAfee Highlights Emerging Cybersecurity Risks Associated with Blockchain") inevitable?

Before the [world’s largest financial](https://www.financedigest.com/how-music-sound-can-help-financial-brands-differentiate-in-a-competitive-world.html "How Music & Sound Can Help Financial Brands Differentiate in a Competitive World") players are ready to dive into crypto, it’s clear that a certain degree of reliability needs to be assured. Of course, there is [risk in any investment](https://www.financedigest.com/the-risks-and-rewards-of-investing-in-venture-capital.html "The Risks and Rewards of Investing in Venture Capital"), but the past decade has shown crypto to be particularly volatile.

To combat crypto’s inherent volatility, the creation of the first stablecoin came as no surprise, just four [years after Bitcoin](https://www.financedigest.com/cryptoverse-bitcoin-digs-in-for-a-bumpy-new-year.html "Cryptoverse: Bitcoin digs in for a bumpy new year"). According to the online platform [Coinbase](https://www.coinbase.com/learn/crypto-basics/what-is-a-stablecoin), a stablecoin is “a digital currency that is pegged to a ‘stable’ reserve asset like the U.S. dollar or gold”, [specifically designed](https://www.financedigest.com/host-analytics-up-ends-the-enterprise-performance-management-market-with-the-first-product-designed-specifically-for-business-users.html "Host Analytics Up-Ends the Enterprise Performance Management Market with the First Product Designed Specifically for Business Users") to “reduce volatility relative to unpegged cryptocurrencies like Bitcoin”. Reducing volatility is the key assurance banks and other key investors need, and stablecoins go some [way in achieving that assurance by design](https://www.financedigest.com/3-ways-to-go-about-testing-your-business-ux-design.html "3 Ways to Go About Testing Your Business’ UX Design").

During his keynote speech at Sibos, Menon also explored the use of CBDCs, another viable option that we might see becoming increasingly [common as we move into a financial](https://www.financedigest.com/3-common-financial-hurdles-for-the-self-employed-and-how-to-overcome-them.html "3 Common Financial Hurdles for the Self Employed (And how to Overcome Them)") future that accepts blockchain solutions more freely.

In their essence, CBDCs are [digital currencies produced by central banks](https://www.financedigest.com/the-journey-towards-a-digital-bank-five-major-stages-to-successful-banking-digitalisation.html "THE JOURNEY TOWARDS A DIGITAL BANK – FIVE MAJOR STAGES TO SUCCESSFUL BANKING DIGITALISATION"). Not unlike stablecoins, they are pegged to a [nation’s fiat currency as a measure](https://www.financedigest.com/national-cinemedia-releases-first-cinema-attention-measurement-study-conducted-by-lumen-in-collaboration-with-dentsu.html "National CineMedia releases first cinema attention measurement study, conducted by Lumen in collaboration with dentsu") to keep their volatility in check. Banks are increasingly looking to CBDCs, with the Bank of England’s [CBDC Taskforce](https://www.bankofengland.co.uk/research/digital-currencies/cbdc-taskforce-terms-of-reference) being a strong example of this.

So, are blockchain solutions inherently risky? The simple answer is no. I hope to see more financial bodies, like MAS, turning to blockchain to [solve real-world issues](https://www.financedigest.com/how-the-financial-services-industry-can-solve-the-issue-of-vulnerable-code.html "How the financial services industry can solve the issue of vulnerable code") that have needed serious attention for years.

**Getting ahead of the curve**

Blockchain has the potential to revolutionize the [way we make cross-border payments](https://www.financedigest.com/5-ways-banks-can-compete-in-payments.html "5 ways banks can compete in payments"). With its ability to transfer value transparently and securely [across borders without the need](https://www.financedigest.com/tech-awakening-needed-across-uk-workforce.html "Tech awakening needed across UK workforce") for intermediaries, blockchain could make international transactions faster, cheaper, and more efficient.

It’s not just the Monetary Authority of Singapore that has begun exploring the use of CBDCs as a way to take advantage of the benefits of [blockchain technology](https://www.financedigest.com/venom-foundation-and-hub71-partner-to-accelerate-growth-and-adoption-of-blockchain-technologies-from-abu-dhabi.html "Venom Foundation and Hub71 Partner to Accelerate Growth and Adoption of Blockchain Technologies from Abu Dhabi"). Recently, the European Central [Bank started road testing a digital euro in Spain whilst the Bank of England](https://www.financedigest.com/bank-of-england-officials-split-over-future-path-for-rates.html "Bank of England officials split over future path for rates") has started accepting applications for a CBDC digital wallet prototype. By issuing their own currencies, these [central banks](https://www.financedigest.com/analysis-china-central-bank-under-pressure-to-ease-is-hemmed-in-by-inflation-fed-jitters.html "Analysis-China central bank, under pressure to ease, is hemmed-in by inflation, Fed jitters") can make it easier for individuals and businesses to make cross-border payments, while also gaining greater control over the monetary system.

If blockchain solutions are going to be implemented [across the board](https://www.financedigest.com/board-report-highlights-complex-decision-making-process-across-banking-and-finance-sector.html "Board Report Highlights Complex Decision-Making Process Across Banking and Finance sector") for the use of cross-border payments, especially within the institutions that want to operate without the high chance of risk that comes with unpegged cryptocurrencies, both stablecoins and CBDCs seem to represent the future.

What’s [important to remember is that despite](https://www.financedigest.com/despite-the-headwinds-investors-have-important-reasons-to-be-cheerful.html "DESPITE THE HEADWINDS, INVESTORS HAVE IMPORTANT REASONS TO BE CHEERFUL") the decreased likelihood of significant losses on investment, the correct level of knowledge is still vital. Those [financial institutions](https://www.financedigest.com/what-the-future-holds-for-financial-institutions-in-2023.html "What the Future Holds For Financial Institutions in 2023") that are considering stablecoins and CBDCs should align themselves with a partner who can provide the necessary expertise.

The potential strength of pegged cryptocurrencies is clear, and they [might just be the key to a blockchain-led future](https://www.financedigest.com/explainer-how-the-world-health-organization-might-fight-future-pandemics.html "Explainer-How the World Health Organization might fight future pandemics"). To [stay ahead](https://www.financedigest.com/staying-ahead-of-risk-this-black-friday.html "Staying Ahead of Risk This Black Friday") of the global trend, FIs and banks across the globe should start familiarising themselves with stablecoins and CBDCs. Once the knowledge is there, I’m confident widespread adoption will follow.


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