As 2024 closes, blockchain payments are rapidly gaining traction, with major financial institutions increasing their support:
September 26: BlackRock collaborates with Ethena to issue USDb, a USD stablecoin.
October 3: PayPal completes its first stablecoin transfer with PYUSD in partnership with EY.
October 3: VISA announces VTAP, enabling independent stablecoin issuance for institutions.
October 3: SWIFT plans digital currency and asset trading experiments for 2025.
October 16: Stripe partners with Paxos to support stablecoin payments.
October 19: Societe Generale issues EUR CoinVertible, a euro stablecoin.
October 21: Stripe acquires Bridge, a stablecoin payment startup, for $1.1 billion.
October 22: BRICS announces BRICS Pay, a payment system challenging SWIFT.
October 24: Coinbase and A16Z invest in Skyfire, a blockchain-AI integrated payment firm.
This series of developments contrasts sharply with the skepticism blockchain faced just a few years ago, when projects like Meta’s Libra struggled against regulatory barriers. Today, blockchain payments are resurging. Here’s why.
Blockchain Payments’ Advantages in Cross-Border Transactions
Blockchain payments offer unmatched efficiency in cross-border transactions, allowing secure and transparent data exchange across trust boundaries between financial systems, countries, and institutions. Traditional systems require multiple intermediaries for reconciliation, slowing transaction speeds and increasing costs. Blockchain technology replaces this with distributed ledgers, enabling real-time transaction updates and reducing costs.
Notable projects like the Bank for International Settlements' mBridge, a blockchain-based cross-border payment system, demonstrate this. By 2023, mBridge showed that blockchain can reduce cross-border payment time from days to seconds and lower transaction fees to near zero. Other examples, like a cross-border micropayment trial by a major Australian bank, showed $100,000 in SWIFT remittances cost $1,240 in fees, whereas the same transactions on blockchain cost only 30 cents.
With around 560 million digital currency holders globally and 82 million active blockchain payment users, the demand for blockchain-based transactions is accelerating. According to VISA, public stablecoin payment volumes reached $1.8 trillion monthly by Q3 2024, with applications moving beyond speculative trading. Circle, the issuer of USDC, reports a 90% decrease in USDC’s use in speculative trades, with real-world transactions filling the gap.
Challenges to Blockchain’s Wider Adoption
Despite blockchain’s success, public awareness remains limited, primarily due to three factors:
1. Political Pressures: Some governments resist blockchain adoption due to potential impacts on established financial systems. For instance, the United States has discouraged the adoption of blockchain projects like mBridge, concerned that they might undermine traditional systems such as SWIFT and affect the U.S. dollar’s role in global finance.
2. Institutional Resistance: Many commercial banks limit blockchain experiments to innovation departments, largely due to concerns about disrupting current business models.
3. Media Skepticism: Negative media coverage has overshadowed blockchain’s progress, linking it with speculation and illegal activities, which deters many users from exploring blockchain payment systems.
Why Blockchain Payments Are Here to Stay
Several factors make blockchain’s progress irreversible:
1. Competitive Advantages: Blockchain provides significant performance and cost benefits—sometimes thousands of times over traditional systems—making its advantages too substantial to ignore.
2. Evolving Regulatory Understanding: Financial regulators are increasingly recognizing blockchain’s capacity for real-time compliance monitoring and efficient enforcement through programmable smart contracts, as shown in Singapore’s Ample FinTech experiment. Additionally, influential voices, like Zhou Xiaochuan at the October 2024 Financial Street Forum, acknowledge that blockchain innovations like mBridge could coexist with current systems like the U.S. dollar.
3. Global Competition: With increasing global tensions, no single power can halt blockchain’s development for long. Nations are incentivized to adopt blockchain to stay competitive in an evolving technological landscape.
4. Expansion Beyond Finance: Blockchain’s applications are extending beyond finance, offering transformative possibilities for data management, organizational collaboration, and even military applications. Once user adoption is more widespread, blockchain could revolutionize numerous sectors, much like the internet did in the 1990s.
In summary, blockchain payments are not only making a comeback but also paving the way for a new era of efficient, cross-border value exchange. Despite current resistance, blockchain’s advantages are too compelling for the financial industry—and broader economy—to ignore.
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