Crypto cross-border payments, explained

1.

How do crypto cross-border payments work?

These transactions are executed using blockchains — eliminating the need for banks, who often slow payments down substantially.

Let’s imagine that you’re in Spain but want to send funds to Africa. The first step involves converting fiat currency into a digital asset of your choice. A wide range of websites and platforms exist that serve as an “on-ramp” — meaning purchases can be made using bank transfers and credit cards.

This cryptocurrency can be held in a secure wallet. When it’s time to make a transfer to your friends, they can give you the address for their wallet — comparable to the account number you’d get at an old-fashioned bank. These addresses can contain dozens of characters, so transcribing them carefully is crucial.

Once funds have arrived in an account, the recipient has several choices. They can either convert the crypto to fiat and withdraw it, or swap it for a less volatile digital asset such as a stablecoin.2.

What advantages does crypto offer over fiat?

It’s cheaper and faster… and could also help clamp down on money laundering.

There’s a lot of excitement surrounding how crypto could transform cross-border payments as we know it — making remittances, where workers in foreign countries send funds to their loved ones back home, much less expensive.

At present, the World Bank estimates that remittances sent through fiat channels result in average fees of 6.75%. For someone on a modest income, this can take a substantial chunk out of their earnings. Although this is less than the 9.67% charged in 2009, there’s still a long way to go. In the early 2010s, the G8 and the G20 set a target of slashing remittance costs to 5% — and the United Nations’ Sustainable Development Goals also set a target of 3% by 2030.

Cryptocurrencies could help these goals be realized much faster. According to figures from Deloitte, blockchain has the potential to reduce transaction costs by 40% to 80%. But the advantages may not end here. Currently, it can take three to five business days for funds to clear through old-fashioned wire networks — not ideal for someone who needs money in a hurry. But on certain blockchains, it’s possible for payments to be confirmed in seconds.

The advantages may not end here. As Deloitte notes, blockchain transactions can be data rich — meaning that metadata can be transmitted from end to end. All of this can help clamp down on money laundering and terrorist financing, two areas of concern for regulators. Many crypto platforms have introduced Know Your Customer checks to verify users, too.

One crucial benefit that cryptocurrencies can offer is unlocking access to financial services for the unbanked. Research suggests that 80% of consumers in sub-Saharan Africa fall into this category — and worldwide, a total of 1.7 billion people don’t have a bank account. There can be a multitude of reasons for this. Financial institutions may not operate in their geographic area, these services could be too expensive, or consumers may have a lack of trust.3.

How much money is sent around the world using crypto?

Digital assets have a modest market share of overall cross-border payments — but demand is growing.

According to Juniper Research, international digital remittances are set to surge to $525 billion by 2024… a 102% rise from where they were in 2019. This figure includes fintech platforms that solely deal in flat.

“Utilizing a blockchain-powered network, operators can offer their users a much faster, cheaper and more transparent service,” the authors said.

This view has been echoed by BlockData, which recently revealed that blockchain-based transactions are typically 388 times faster and 127 times cheaper than traditional remittances.

It’s a fast-moving industry, and it’s difficult to put an exact number on the volumes of cross-border payments made using crypto. However, figures from Clovr showed that 15% of those who made remittances from the U.S. in 2017 used a digital asset such as Bitcoin — making it more popular than prepaid cards, checks and cash. When it comes to business-to-business payments made via blockchain, this figure stood at $171 billion in 2019, but Juniper Research estimates that this will exceed $4.4 trillion in just four years’ time.4.

What are the downsides to using crypto?

The likes of Bitcoin often get criticized for being too volatile, and some say blockchain technology is too difficult for everyday consumers to understand.

It’s important to note that there’s one factor that will determine whether or not crypto-based cross-border payments are cheaper: the digital asset that’s being used.

Making transfers using Bitcoin and Ether can be expensive, especially during times of peak demand. Ethereum has been overwhelmed by transaction volumes on multiple occasions over the years — fueled by a rise in demand for collectible cats and decentralized finance. Addressing scalability concerns is going to be crucial if cryptocurrencies are going to be used more widely for remittances. Ripple, which doesn’t have a blockchain, offers solutions that are designed to make cross-border payments less expensive through the XRP asset. Several banks are already on board, and Ripple claims that it can process 50,000 transactions per second.

Crypto will only help to solve financial inclusion provided that those who stand to benefit most from remittances can be educated about how digital assets work, and have access to internet-enabled smartphones so they can access their funds. There are reasons to be optimistic here. As we mentioned earlier, 80% of consumers in sub-Saharan Africa are unbanked, yet 91% own a mobile phone — and smartphone adoption is rising. On the continent, mobile payments are also exceedingly popular, meaning that the leap to crypto-based transactions may not be a big one.

The final challenge concerns regulation. Industry executives have warned that more crypto regulation is coming, with the European Union recently announcing plans to comprehensively monitor the market in just four years’ time. This doesn’t necessarily mean that a ban on digital assets is on the horizon — indeed, many lawmakers have acknowledged that they can have advantages in reducing the costs associated with cross-border payments. As a result, some are exploring whether they should launch their own central bank digital currency.5.

How can you easily, securely store and exchange cryptocurrencies?

By using a platform that has a carefully cultivated reputation for keeping digital assets safe.

Crypto platforms are emerging that aim to make cross-border payments far less expensive than what many of us are accustomed to.

One of them is Changelly PRO. The company firmly believes that cryptocurrencies offer far greater levels of transparency than traditional financial institutions, and this will help instill confidence among consumers. Dozens of trading pairs are offered across the world’s biggest digital assets.

The platform is aiming to level the playing field by offering zero deposit fees, as well as competitive fees when funds are withdrawn from an account. This is coupled with an easy-to-use, intuitive interface — and 24/7 support for users around the world. Changelly PRO says its priority is making crypto simple, and offering cutting-edge solutions that beginner and professional traders alike will find advantageous. 

Education is another area that Changelly PRO is hoping to address. To ensure that newcomers can get the most out of the service, in-depth learning materials cover everything from setting up an account to keeping it secure.

In September, the platform unveiled a brand-new iOS app for iPhones, giving users the freedom to complete transactions while on the move. This will also prove advantageous for those who don’t use a computer.

With demand for remittances unlikely to subside, crypto-focused platforms are likely to play an instrumental role in delivering a fairer deal for consumers. This could help inject some much-needed competition in the space, forcing traditional institutions to innovate.

Source: Changelly PRO Partnership material.

Financial Inclusion, Cryptocurrency and the Developing World

Regions of the world with fast-growing economic potential and young populations, such as India and Africa, will become leaders in crypto adoption

four assorted cryptocurrency coins
Photo by Worldspectrum on Pexels.com

Beyond rapidly changing how we create, store and transfer value, cryptocurrencies are accelerating financial inclusion in a way that traditional financial institutions have either been unwilling or unable to. Yet crypto’s possibilities go way beyond banking the unbanked. It allows developing nations and those without access to financial services to avoid the bank completely and transact and grow small businesses using just a mobile phone.

Why financial inclusion is so important

Even today, almost 2 billion people around the world have no access to financial services. That’s approximately one-fourth of the global population. Having nowhere to place savings and not being able to get a bank card, obtain credit or avail of basic services such as life insurance is a horribly crippling disadvantage. These people are effectively unable to take part in their local economies — at least, in meaningful ways.

Gaining access to financial services will allow financially excluded people to improve their lives, increase their earnings, raise their household income and even stash away some savings for troubled times such as the ones we’re living in currently. Entrepreneurs can gain access to credit to start a business and families can acquire land and livestock and ensure that the roofs over their heads are safe. Quality of life can be improved for all.

Further still, impoverished parents can begin to send their children to school, offer them improved living conditions and access healthcare services. Financial inclusion can even lead to the creation of jobs as small businesses expand and need to take on additional personnel. We’re talking about a massive section of the global population that could substantially motor the economy through financial inclusion.

Developing countries are home to a young, tech-savvy population

The vast majority of financially excluded individuals live in developing regions. Yet this also coincides with a young, largely tech-savvy population. In parts of Africa, for example, mobile phones are more common than access to electricity. They have long been used as a primary tool for daily life exchanges and, more recently, for cryptocurrency use.

Across Africa, some 200 million people are between the ages of 15 and 24. This makes them generally well-versed in technology and a naturally captive audience for cryptocurrency adoption. This is mirrored by the population in many developing countries including IndonesiaTurkey and India. A tech-savvy population with a high mobile phone penetration rate — and a pressing need for financial services: This creates the perfect conditions to accelerate the adoption of cryptocurrencies.

As many people can’t access the traditional banking system, being able to earn, save and transact in cryptocurrencies directly from a telephone is hugely beneficial.

Ripe for cryptocurrency adoption

India is currently one of the most promising markets for cryptocurrency adoption and financial inclusion right now. With the regulatory framework improving this year with the Supreme Court of India overturning the Reserve Bank of India’s ban on cryptocurrency, adoption in the world’s second-most populated country could really take off.

India’s national currency, the rupee, has steadily declined in value against the United States dollar over the last decade. And with the COVID-19 pandemic causing increased money printing in India just as in other parts of the world, the rupee is being devalued further. Declining confidence in the national fiat currency as well as the government could be a large catalyst for cryptocurrency adoption in India and in many parts of the world.

Along with Africa and Indonesia, India’s population is young and very familiar with technology. In fact, around 8% of India’s gross domestic product comes from its well-developed IT outsourcing industry. The country has the skills and technical talent to make crypto startups flourish here. And with the largest remittance market in the world, crypto is the perfect use case for unshackling people from the high fees and lengthy delays involved in sending money home.

Onboarding the next wave to crypto

Of course, the right conditions and the potential don’t make crypto adoption a done deal. There is still much work to be done. The scene is being set for more and more crypto startups, remittance companies, exchanges and applications to appear across the developing region. At OKEx, we see the giant potential for crypto adoption in these parts of the world, and we want to be at the forefront of it. This is why our partnership with Paxful, the leading peer-to-peer Bitcoin (BTC) marketplace, is all the more significant.

Paxful has an extensive payment method infrastructure that allows local people to select how they pay for their Bitcoin from more than 300 different ways. This could be gift cards, store points, cash on delivery — or indeed any local method deemed acceptable by the seller. This kind of flexibility allows it to onboard people into cryptocurrency more easily.

They can then send and receive Bitcoin for goods and services and, through OKEx, earn interest on their BTC savings through high-interest accounts as well as make their money work for them accessing advanced trading tools.

As regulation becomes more favorable and the people’s needs are still repeatedly ignored by traditional finance, a young population with high mobile penetration will help financial inclusion to finally become a reality. The next wave will soon be onboarded to crypto, and it’s the developing world that will be leading the charge.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cryptopayplus LTD

Amazon Presents Its Quasi-Blockchain Solution, Platform for Ethereum and Hyperledger Fabric

On Nov. 28, e-commerce giant Amazon announced two blockchain-related products: Amazon Quantum Ledger Database (QLDB) and Amazon Managed Blockchain. The company hence marked its further expansion into the field of blockchain technology, which started with blockchain-related patents and collaborations that Amazon has seemingly chose over working with cryptocurrencies, per se.

So what are those new projects and are they going to change the crypto industry?

QLDB: Cryptographic, but centralized database

As per Amazon’s website, QLDB is a ledger database designed to provide “transparent, immutable and cryptographically verifiable log of transactions,” which is overseen by “a central trusted authority.”

Thus, all changes are purportedly recorded on-chain, while the new product is also able to automatically scale to “execute 2–3X as many transactions than ledgers in common blockchain frameworks.” Indeed, Andy Jassy, the CEO of Amazon Web Services (AWS), reportedly stated that the QLDB “will be really scalable, you’ll have a much more flexible and robust set of APIs [application program interfaces] for you to make any kind of changes or adjustments to the ledger database.”

Additionally, QLDB allegedly uses a cryptographic hash function (SHA-256) to generate a secure output file of data’s change history, serving as a proof that “validates the integrity of data changes.”

“With QLDB, your data’s change history is immutable — it cannot be altered or deleted — and using cryptography, you can easily verify that there have been no unintended modifications to your application’s data,” according to the description on Amazon’s website.

Walter Montes, co-founder of the Costa Rican Blockchain Community, told Cointelegraph that — being a centralized product — QLDB cannot be compared to decentralized solutions, although it does attempt to do so in its roadmap:

“It makes no sense to compare things like transactions per second from a centralized service to a decentralized one. There are reasons why these things are decentralized and these are not merely technical ones. Amazon seems to miss the point by comparing QLDB with a blockchain.”

Even if one attempts to compare QLDB with permissioned blockchains, which are common among industry-level corporations because of their security, there are major distinctions between the two, says Montes:

“Permissioned blockchains handle cryptography in a decentralized way, which provides properties like historical evidence […] Another relevant point is the value of the smart contracts or chaincodes, which function as agreed and signed rules on how to modify the data. At least in the public information, they only address the immutability promise, but what about the governing rules of data? Without that, they only log whatever happens, with no real proactive control.”

That technically makes QLDB a database, argues Eyal Shani, a blockchain researcher and former software engineer, as well as Aykesubir consultant:

“QLDB is a normal database from that sense, [while] a blockchain database is also an immutable ledger […] the QLDB tech is another layer of software which eases the development of ledger-like software.”

Montes also agrees that QLDB resembles a conventional database, adding that its cryptography feature still makes it inferior to blockchains in terms of safety.

“Cryptography may calm down some users but doesn’t provide the security and robustness that a blockchain provides. [It is more] like a marketing tool.”

Moreover, the fact that there is a central authority overseeing the whole process might make it less reliable among competing businesses:

“Imagine six banks of the same size trusting one of them (a competitor) to hold a ‘cryptographically linked-list’ that they can verify. They simply won’t trust it. [Instead], they’d end up creating their own data store and then checking data versions daily. Cryptography is there in part to verify things, but when you can’t even do that, it falls short.”

Why QLDB avoids decentralization?

So who are the potential users of Amazon’s QLDB solution? Perhaps those who have become skeptical of the blockchain buzzword, now that the hype has begun to settle, suggests Shani:

“Some believe in that as much as Satoshi and some don’t want to hear about decentralization, possibly because of the bad reputation it had and the excessive amount of speculators in the cryptosphere.

“It’s marketing buzz, we see it with artificial intelligence and [the] Internet of Things, too. That may continue to happen until creating a real decentralized blockchain is as easy as creating a database today.”

Therefore, with further development of blockchain comes greater adoption. It might take more time until decentralization becomes a more trusted solution among corporations looking to shield their data from tampering:

“Decentralization of trust as a concept is something that could fundamentally disrupt some industries, but it’ll take time until we get there. The public and the regulators would have to change their mindset in order for that to happen fully […] Meanwhile, the use of blockchain-like applications and tokenization of assets is already a big jump to many industries and will ease the change into blockchains in the long run.”

Amazon Managed Blockchain: Add-on to QLDB or independent blockchain solution?

Amazon Managed Blockchain, which was announced along with the QLDB, “makes it easy to create and manage scalable blockchain networks using the popular open source frameworks HyperledgerFabric and Ethereum,” but also works with QLDB itself, according to the company’s website.

Further, the product automatically scales depending on the needs of specific applications and is deployed in managing certificates, inviting new users to the network and tracing metrics, such as memory and storage resources and usage of computer, Amazon argues. AWS CEO Andy Jassy claims that this service “is going to make it much easier to use the two most popular blockchain frameworks [Ethereum and Hyperledger Fabric].”

Shani questions that argument by stating that Ethereum and Hyperledger blockchains are already “easily” set up in the industry’s present circumstances. The blockchain researcher also emphasizes the vagueness of Amazon’s press release:

“Governance in distributed protocol is an important aspect, but it’s unclear in what manner Amazon achieves this. If they implemented it in a centralized manner, how different is that from QLDB?”

Montes, in turn, doesn’t believe that a managed blockchain service offering may be around for long because “it limits open scalability (in a technology that is based on network-effects) by locking it up into a single cloud provider.” However, such solutions might be useful for testing and proof-of-concept (PoC) operations, he adds.

Still, the fact that a company as large as Amazon announced new blockchain-related products might seem like a healthy sign for the industry.

“From a macro point of view, the more research and development being done around Ethereum, the more the protocol strengthens and grows into a global adoption as a standard,” Shani concludes.

IMF Vows to Continue ‘Devoting Attention’ to Blockchain, Cryptocurrency in Fintech Drive

The International Monetary Fund (IMF) said it plans to use its ongoing research and experimentation with blockchain as an “anchor” for its future policy on the technology in comments Nov. 12.

Speaking on a panel with Ripple CEO Brad Garlinghouse during the Singapore Fintech Festival 2018, IMF Deputy General Counsel Ross Leckow highlighted three areas the organization has been “active” in regarding blockchain, cryptocurrency and more.

“The IMF is devoting a lot of attention to fintech and in particular to blockchain,” he told the audience, continuing:

“But we think that it’s difficult to talk about blockchain without considering it in light of the other new technologies that are forming part of the fintech debate.”

For Leckow, these include artificial intelligence (AI), so-called distributed ledger technology (DLT), cryptoassets and several others.

He further underscored the continued research efforts underway at the the IMF regarding cryptocurrency and blockchain, referring to the various documents published in recent years.

Member banks and governments, he added, were demonstrating considerable interest in guidance on how to handle and regulate the emerging sector.

“Given the demand for advice in this area, at our annual meeting in Bali last month, we and the World Bank jointly launched an initiative called the Bali Fintech Agenda, which we think is the first comprehensive framework of issues that countries need to think about when designing policy around fintech,” Leckow said.

“This will be an anchor for much of our work going forward.”

Thai Revenue Department to Track Tax Payments Using Blockchain

The Thai Revenue Department has revealed its plans to track tax payments using blockchain and maсhine learning, local news outlet Bangkok Post reported Nov. 5.

Ekniti Nitithanprapas, the Revenue Department’s director-general, told reporters that blockchain will be used to verify the validity of taxes paid and to speed up the tax refund process.

Machine learning, in its turn, will help reveal tax fraud and create more transparency, Nitithanprapas also noted. The official further noticed that a digital tax collection system based on modern technologies is one of the government’s top priorities.

Nitithanprapas, who has also been International Economic Advisor of Fiscal Policy Office for the country’s Ministry of Finance since 2015, did not reveal when exactly the Department’s experiment with blockchain was going to start or which particular solutions it would use.

The Thai Revenue department is evidently following the path of the country’s Ministry of Commerce in terms of tech adoption  – the Ministry announced last month that it will trial decentralized solutions in copyright, agriculture, and trade finance. The Thai official responsible for the project explained that blockchain feasibility studies would refer to processing digital IDs, IP registration management, and security, along with smart contracts.

Thailand’s finance industry also has a stake in deploying blockchain networks. In October, Thailand’s oldest bank, Siam Commercial Bank, partnered with global management consultancy firm Accenture to release a blockchain platform for supply chains.

In September, Thailand’s fourth largest bank, Kasikornbank, partnered with Visa’s B2B Connect program to provide its customers with blockchain-powered solutions for cross-border payments.