Cryptocurrencies a ‘Good Alternative to Traditional Settlement Processes’ – Study – Featured Bitcoin News
Cryptocurrencies can be a good alternative to conventional settlement processes because they are underpinned by blockchain technology that enables instant completion of transactions without the involvement of intermediaries, a new report has said. Some players in the cross-border money transfer industry see blockchain and cryptocurrencies as technologies that can improve payment processes.
Cryptocurrencies eliminate costly practices for money transfer providers
Using cryptocurrencies to settle transactions can be a useful “alternative to traditional settlement processes,” says the latest report from the International Association of Money Transfer Networks (IAMTN). According to the report, this is due to the fact that on the blockchain – the technology underlying cryptocurrencies – transactions are settled instantly without having to go through intermediaries such as correspondent banks.
The combination of declining correspondent banking ratios and the increasing volume of cross-border transactions further underscores the importance of the blockchain in not only lowering the cost of transferring funds, but making the transfer of money across borders much faster.
“Cross-border transactions can be settled almost instantly, thereby avoiding the need for pre-funding accounts in recipient countries, which is a costly practice for remittance providers. A range of businesses, ranging from traditional remittance services to cryptocurrency fintechs, are using blockchain technology to improve remittance processes,” the report explains.
To substantiate this claim, the report includes the findings of a study conducted by IAMTN that sought the views of industry players on innovative technologies that can improve the process of sending funds across borders. As suggested by the findings, both blockchain and cryptocurrencies are seen as innovations that “bring [an] infinite number of possibilities in cross-border payments.”
Open application programming interface (API) and artificial intelligence (AI) are the two other technologies perceived to have the potential to improve the remittance process, the IAMTN study also found. In addition to disrupting the financial services industry, many of these new technologies could “permanently improve the infrastructure behind cross-border payments, in the interest of end users.”
Regulatory uncertainty slows down the introduction of new technology
Nevertheless, the report said that payment service providers keen to integrate new technology into their business often face challenges in the form of rigid national regulations or the absence of any laws governing such technologies. According to IAMTN, the fact that only a few countries regulate the use of blockchain “creates a degree of uncertainty for businesses that use, or want to use, this technology”.
The report also said that barriers such as accessibility, lack of awareness, literacy and trust often discourage or make new technologies unattractive even when their use results in significant savings. Therefore, to overcome some of these challenges, IAMTN encourages policy makers to tailor their solutions to these realities.
What are your thoughts on this story? Let us know what you think in the comments section below.
Image credit: Shutterstock, Pixabay, Wiki Commons
