Globalization of Digital Payments

Ranjo Denbow, SVP External Affairs, eCurrency


A large number of stablecoin entrants has overwhelmed the fintech stage. Notably, with Facebook’s Libra being one of the most recent and having the potential for the most global reach. Stablecoin initiatives were introduced as lower risk alternatives to cryptocurrency. As the name implies, it is intended to be a “stable” asset or token, with the hope that stablecoins are pegged to a national currency or basket of currencies. Though more stable, stablecoin is issued by a private entity and does not hold legal tender status in and of itself. With the large number of companies introducing stablecoins, governing authorities are pressed to put in place regulatory and supervisory frameworks.

Stablecoins are putting focus on the shortcomings of existing solutions for instant cross border payments. Until now, there has been great progress made to achieve instant payments domestically in many countries. These payments though provide ease of transacting and remitting have been limited to within the borders of the country. When transacting outside the country, many factors including cost, efficiency and non-interoperability are stymying progress. The capability to transact an instant cross border payment that is interoperable with other systems is being sought out by many countries.

The influx of stablecoin solutions is also causing central banks and public authorities to consider the monetary policy, monetary sovereignty, security and regulatory effects of global stablecoin. Legitimization merely through mass adoption is not the answer to a trusted instrument for international payments. The G7 believes that no stablecoin should be put in operation until all adverse effects of a global stablecoin is addressed. A report published by the G7 working group on stablecoin released in October 2019 details implications of a global stablecoin. In this report, central banks across the globe are encouraged to share their learnings on the various solutions in order to improve payments solutions across jurisdictions.

An interoperable cross border instant payments system that is reliable, fast, and seamless would enable transactions between real-time national payments services. The ability to remit payments across multiple systems and across multiple currencies would ease international remittances and remove the cost and friction currently being experienced.

The payments landscape is transforming rapidly from a primarily domestic to that of a more global one, that has the capability to cross national borders with the same efficiencies and lower costs. The World Bank is reporting a significant rise in international remittances, predicting a rise that overtakes foreign direct investment in the next couple of years.[1]

Though there is some debate on what positive or negative effect growth in remittances have on economic growth in a country, the high costs of transferring cross borders certainly impedes the beneficial factors. Studies are showing that costs are lower than a decade ago, however they are still more than double that of sustainable development goals.


Figure: Remittance flows to low- and middle-income countries, official development assistance, and private capital flows, 1990–2018, with estimates to 2021

Sources: World Bank staff estimates; World Development Indicators; International Monetary Fund’s Balance of Payments Statistics.

Note: The figure for 2018 is an estimate; that for 2019 is a forecast. See appendix A in World Bank (2017b) for data and forecast methods. FDI = foreign direct investment; ODA = official development assistance.


In an era of digitization and international commerce, cross-border payments systems are of utmost importance. With this realization, eCurrency offers its eSDR solution. The eCurrency eSDR™ technology allows the issuance and the ability to transact in a global digital composite asset powered by eCurrency. This asset is issued with eCurrency technology based on eCurrency digital fiat currency solution that enables central banks to issue digital fiat currency. This technology has been proven in high volume retail production and proof of concept environments in five countries. The eCurrency eSDR is fast, seamless, consistent and secure. Utilizing the IMF’s Special Drawing Right (SDR) as the reference basket of currencies, the eSDR eliminates concerns existing in current methods of cross border payments.

[1] World Bank Group, Leveraging Economic Migration for Development – A Briefing for the World Bank Board, September 2019, pp 14-18

REFERENCES:

World Bank Group, Leveraging Economic Migration for Development – A Briefing for the World Bank Board,

September 2019 - https://www.knomad.org/sites/default/files/201908/World%20Bank%20Board%20Briefing%20Paper-

LEVERAGING%20ECONOMIC%20MIGRATION%20FOR%20DEVELOPMENT_0.pdf

World Bank blogs, October 2019 - http://blogs.worldbank.org/peoplemove/data-release-remittances-low-andmiddle-income-countries-track-reach-551-billion-2019

G7 Working Group on Stablecoins – Investigating the impact of global stablecoins, CPMI, October 2019 - https://www.bis.org/cpmi/publ/d187.pdf

Finextra, EU pushes for cross-border instant payments, June 2019 - https://www.finextra.com/newsarticle/34013/eupushes-for-cross-border-instant-payments

The Banker, Making cross-border payments seamless, convenient and fast, September 2019 -

https://www.thebanker.com/Transactions-Technology/Making-cross-border-payments-seamless-convenient-and-fast

PYMNTS.com, Deep Dive: Making Instant Payment Schemes Universal and Interoperable, April 2019 - https://www.pymnts.com/news/faster-payments/2019/interoperable-real-time-cross-border/


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