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Cross-border payments using cryptocurrencies – Industry roundup: 23 May

SWIFT conducts CBDC-related tests on cross-border payments using cryptocurrencies

Central banks’ interest in central bank digital currencies (CBDCs) has grown rapidly in recent months. According to a report called Gaining Momentum - Results of the 2021 BIS Report on central bank digital currencies released on May 19 by SWIFT on experiments with the Bank for International Settlements (BIS), these CBDCs cover economies that account for more than 90% of the world's GDP.

Increasingly more of these central banks have progressed faster in their investigations of the CBDC, with nine countries already operating their own digital currencies, most notably Nigeria and the Bahamas. Thomas Zschach, Chief Innovation Officer, SWIFT, commented that the CBDC, or the digital version of the real central bank's money, is drawing significant attention, as many are focusing on how it can help achieve domestic policy goals. However, there is uncertainty surrounding its usage across international borders.

Zschach further added that facilitating interoperability and linking between the various CBDCs being developed globally is important to maximizing their potential. Additionally, many central banks today are developing their own digital currencies based on different technologies, standards and protocols, putting the global CBDC ecosystem at risk of fragmentation. Likewise, Nick Kerigan, Head of Innovation, SWIFT, revealed that if left unchecked, this fragmentation could potentially lead to the formation of "digital islands" around the world.

SWIFT reportedly proved in 2021 that it can effectively arrange cross-border transactions between one company and another using a DLT-based CBDC network and a proven real-time gross settlement system (RTGS). Now, SWIFT, in partnership with Capgemini, will examine how it can interconnect multiple domestic-based CBDC networks that are increasing globally, making cross-border payments smoother and frictionless.

Tapping into global crypto liquidity via Ripple and FINCI alliance in Lithuania

Ripple, a provider of blockchain and cryptocurrency solutions for enterprises, has announced a partnership with FINCI, Lithuania's international online money transfer provider, to offer immediate and cost-effective retail remittances and business-to-business (B2B) payments through RippleNet’s On-Demand Liquidity (ODL). The alliance reportedly will leverage XRP for crypto-enabled cross-border payments.

According to reports, FINCI is Ripple's first client in Lithuania, representing the development of a new market for Ripple's ODL. This partnership is said to enable FINCI clients to make seamless payments between Europe and Mexico, eliminating the need for FINCI to pre-fund their accounts abroad and giving them the opportunity to return capital to their business.

Cross-border payments are a challenge for payment service providers (PSPs) and small and medium-sized enterprises (SMEs). However, ODL is said to offer SMEs the ability to leverage previously committed and pre-funded capital to potentially grow and expand their business.

The combination of the two fintechs reportedly will make it easier for consumers and businesses to pay in real time internationally using Ripple’s financial technology, RippleNet. Additionally, with FINCI technology, customers should have an alternative to traditional payment systems and the ability to initiate and receive payments faster, more reliably and at a lower cost across borders.

Ripple's New Value survey stated that 70% of respondents from European financial institutions believe that blockchain will have a significant impact on their business over the next five years, while 59% of respondents are interested in utilizing blockchain for payments. Sendi Young, Managing Director, Europe, Ripple, commented that Lithuania has a positive view on the adoption of digital assets, as the central bank issued the first central bank-created digital coin in the euro area.

Young stated that Ripple will soon announce additional partners in Europe preparing for crypto-enabled capabilities. Ripple’s ODL is said to currently enable pay-outs in 25 pay-out markets, including Singapore, Malaysia, Poland, Indonesia and Thailand.

Cyprus designs a compelling crypto framework despite crypto state of flux

Bitcoin was slightly above US $30,000, despite a fall in US stocks last week and a 0.58% drop in S&P. Marcus Sotiriou, Analyst, GlobalBlock, UK-based digital asset broker, reported that cryptocurrencies have been decoupled from equities in the short term, as investors consider the range of $28,000 to $32,000 to be significant.

Michael Saylor, CEO, MicroStrategy, commented that the collapse of the UST stablecoin, Terra, will accelerate the regulation of stablecoins and security tokens, ultimately benefiting the industry. Sotiriou concurred that the event of this magnitude will force governments to act swiftly to provide regulatory clarity.

Reports indicate that the government of Cyprus is making progress to clarify regulations for cryptocurrencies, having created their own legislations to regulate crypto assets recently. Additionally, government officials commented that they will probably adopt it before Europe completes a common regulatory framework throughout the continent.

The Deputy Minister for Research, Innovation and Digital Policy stated that Cyprus is known for its rapid progress in advanced innovation, making them the second-best innovative developers in the past year. Additionally, Cyprus welcomes the use of digital and crypto assets, but they are abiding by the lack of regulations as well as the regulations currently in force. GlobalBlock considers this approach of promoting innovation while adhering to applicable EU laws as clever, with potential to attract more GDP as the crypto industry intensifies.

Commonwealth Bank of Australia puts crypto trading process on hold while regulators hesitate

The Commonwealth Bank of Australia (CBA) has shelved plans to offer cryptocurrencies to its customers through their banking app amid widespread volatility in the crypto market. Matt Comyn, CEO, Commonwealth Bank of Australia, claims that once regulatory uncertainty is resolved, the bank will advance a second pilot of crypto services on its app. Additionally, the CBA has suspended plans for a second pilot program of crypto trading services indefinitely, banning access to them in the first test round.

Comyn said there was already a Treasury application for the program under consideration, but he did not share the expected schedule for its completion. Last week's fierce volatility added to the extended delay of the second pilot program after financial regulators refused to allow regular banking users easy access to crypto. Reports indicate that the Australian Securities and Investment Commission (ASIC) has objected to CBA services because of the lack of consumer protection. However, while its volatility, perceptions, and scale are global, Comyn further added that there is still significant interest from regulators.

Dimitrios Salampasis, a lecturer in leadership and entrepreneurship, Swinburne University, told The Guardian news outlet that CBA’s slow progress could be an indication to balance risk, brand equity and regulatory clarity in efforts to minimize disruption in its current business model, especially with the recent price crash across the crypto markets.

CBA reportedly was Australia's first major bank to provide cryptocurrency services through its mobile app in November 2021. As the pilot progressed, the full rollout would have given access to 6.5 million users. Currently, these plans are pending indefinitely.

Xendit, Indonesian Stripe rival, raised $300 million with plans to expand in the region

Indonesia's Xendit, an eight-year-old fintech firm that claims to be an alternative to Southeast Asia's payment processing platform Stripe, raised US $300 million in preparation for regional expansion. According to reports, Xendit stated they actually raised $538 million in total and are currently valued at nearly $3 billion in the latest funding round.

Tessa Wijaya, Chief Operating Officer, and Moses Lo, CEO, commented that Xendit aims to capture the fast-growing internet market in the region with plans to expand into Thailand, Malaysia and Vietnam. A research study by Alphabet's Google, Temasek and consulting firm Bain & Company stated that the internet economy in Southeast Asia is expected to grow to $360 billion by 2025. However, the financial infrastructure start-up is said to face tough challenges from global and local competitors, including Stripe, which claims to be stepping up its efforts in Indonesia and the Philippines.

According to Wijaya, Xendit processed $15 billion in payments across Indonesia and the Philippines in 2021, up from $6.5 billion in 2020. In addition, Xendit currently has 3,000 enterprises in its client list, ranging from telecoms and retail mall conglomerates to SMEs.

According to regulatory officials, Xendit holds a minority stake in Sahabat Sampoerna, an Indonesian bank, and is expected to acquire two other financial companies. Additionally, Xendit made a strategic investment in Dragon Pay, a fintech firm in the Philippines, in 2021 to continue to focus on developing alternative payment methods, including through convenience stores or direct credit on ride-hailing service platform Grab.

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