Didn’t find what you were looking for?
Select your institution type:
Date: 15/07/2024
The landscape of international financial transactions is constantly evolving, and one of the most significant trends in this transformation is the rise of stablecoins as key players in the world of cross-border payments.
The blockchain technology underpinning these stable digital currencies is redefining how businesses and financial institutions view global transactions.
The SWIFT international payment system, created in 1973, is the most globally used system for currency exchange between countries, particularly the dollar. However, this dominance may be waning. There is a substantial flow of stablecoins currently being used for international remittances, but this is just the beginning, as the major institutions operating in this market have yet to adopt this technology fully.
Beyond the realm of CBDCs, there are public (like USDT and USDC) and private (like JPM Coin issued by JP Morgan) stablecoin ecosystems without interoperability, but we believe in their convergence in the future.
"This change is driven by the agility, security, and cost-effectiveness offered by stablecoins. As this category of crypto assets gains ground, a new era in core banking emerges, bringing with it a series of advantages for foreign trade and global finance."
Stablecoins are the fastest-growing crypto asset in the world, accounting for 40% of active wallets in 2023, according to Chainalysis. The segment moves an average of $150 billion per month worldwide. Given this growth, the World Economic Forum projects that 10% of the global GDP will be stored in digital currencies by 2027. The International Monetary Fund notes that stablecoins could offer a more efficient and cost-effective alternative to traditional cross-border payments, especially for low-value transactions.
Businesses and financial institutions are increasingly adopting stablecoins in their operations. Deutsche Bank and SC Ventures of Standard Chartered are testing systems that integrate blockchain, stablecoins, and central bank digital currencies (CBDCs), aiming for an approach similar to SWIFT's messaging layer in legacy banking infrastructure. Blockchain companies like Red Date Technology are launching digital payment networks based on stablecoins and CBDCs, aiming to improve efficiency and reduce the costs of cross-border transactions.
The stablecoin market is diverse, with various emerging companies competing for leadership. For example, Circle is a partner with Parfin in this area. Each of these companies seeks to differentiate itself through transparency, regulation, and strategic partnerships with renowned financial institutions.
For those sending funds, the use of technology improves transparency (fewer intermediaries) and availability (24x7) of remittances, while reducing cost and time depending on the complexity of the flow versus SWIFT. For recipients, stablecoins are equivalent to a dollar account without all the inefficiencies of the traditional financial system.
JPM Coin: A new payment rail designed from the ground up to support domestic and cross-border payments. The digital token JPM Coin can move up to $10 billion in daily transactions over the next two years, according to JP Morgan's global head of financial institution payments, Umar Farooq.
PayPal Coin (USDP): A stablecoin fully backed by U.S. dollar deposits, U.S. Treasury securities, and similar cash equivalents. You can buy and sell 1 PYUSD for 1 USD on PayPal.
Latin America, despite its economic promises, faces significant challenges concerning international remittances, especially for businesses. High fees, long processing times, bureaucracy, and exchange rate risk are barriers that directly affect the growth and competitiveness of companies in the region. In this context, stablecoins offer important benefits, such as transparency and 24/7 operation. These and other advantages can boost the economy of Latin America. To illustrate, just in 2023, stable assets moved a total value of around $53 billion.
By adopting stablecoins, companies in Latin America can overcome many traditional obstacles, positioning themselves better to compete on the global stage.
As stablecoins consolidate their position in the financial market, the future of global transactions appears increasingly digitalized, efficient, and accessible. Parfin, aligned with this vision, is committed to offering innovative and secure solutions for its clients, leveraging the full potential of stablecoins as the new core banking system of the 21st century.
Request a demo
Select your institution type: