Cross-border Bitcoin Payments: An Appeal in the Middle Market

Cross-border Bitcoin Payments: An Appeal in the Middle Market

There are a lot of potential points of friction or failure in cross-border payments between businesses, ranging from slow ends and high costs to counterparty risk.

These are all issues that using Bitcoin, stablecoins, and other digital assets can help you get past Stephen BergCEO, Crypto Payments Technology Company BitPay.

When the Bitcoin blockchain was first launched in 2009, it was the first time the technology allowed value to be transferred from one person to another without a third-party intermediary and, more importantly, without a counterparty, he told PYMNTS of Karen Webster. . Once this transaction is confirmed on the network, it is final and irreversible. So for an international transaction, it makes perfect sense because you don’t deal with the cost, inefficiencies, and slowness of the international correspondent banking system.”

Besides, he added, “there are a lot of risks in this system.”

Making a check for goods or services sold to a company on another continent – and sometimes in a country with a weak financial system – does not imply trust not only in the customer, but also in his bank. He added that it says nothing about accepting the costs and delays associated with the international banking system.

“Conversely, you can suggest that they pay you in bitcoin – in which case it is paid out of their account.” [digital] Husband said. “It’s done, it’s final and that’s the end of it. You now have an asset that has a market value.”

Solve the fluctuations

Of course, the market value of an asset can be very volatile — but bitcoin can be traded for dollars, euros and most other fiat currencies within minutes anywhere you have access to the internet, he pointed out. This price volatility can also be hedged if for some reason you can’t sell it right away – for example, if the crypto payment is locked into a smart contract that pays only when certain conditions are met, such as the arrival of goods safely.

And if you use a service like BitPay, you’ll collect cryptocurrency but pay in fiat, if you so desire — and it generally is, Huss said. “We are taking this volatility risk away from the trader.”

Another solution is to use a stablecoin pegged to the dollar or the euro, he said, adding that it’s becoming more and more popular among his clients — not quite on par with bitcoin, but getting close.

Bayer said that using a stablecoin like USDC “removes some of the complexity around managing the volatility of something like Bitcoin, and it has that advantage.” There is still a learning curve around digital wallets – although they are not very steep, and generally involve partnering with a company that can make these payments.

stuck in the middle

The pair noted that the place for cross-border crypto payments is the middle-market business sector, which finds it more difficult and expensive to move money internationally than large companies with more resources.

“Mid- and mid-sized businesses don’t have a global footprint to be able to manage inter-affiliate transfers,” he said, adding, “However, we have Fortune 100 companies using our platform to do this – inter-affiliate border transfers.”

And while they benefit from in-house crypto payments — which don’t involve counterparty risks but can still cost time and money — Beer said he believes it is small and medium-sized businesses that can benefit the most.

“We have our clients telling us that their only other option takes about three months to finalize the deal,” he said. “It’s not hard to compete with that.”

Risks and rewards

But still, the lack of counterparty risk “is what makes bitcoin a transformative technology,” Bayer said. “All other means of electronic value transfer have a lot of counterparty risk… Even when you make a credit card transaction, there is an enormous amount of counterparty risk in that transaction.”

He added that with cryptocurrency, “it doesn’t matter where that company is, what kind of bank access they have, what kind of financial situation that bank or that company is in. They send you bitcoin, and you can go to the market and convert it to whatever you want.”

The flip side of this is that neither party has the resources of this inefficient banking system when something goes wrong – for example, receiving only 23 widgets when you ordered and paid for 30.

Bayer said this is a different kind of risk with different solutions such as insurance companies.

He said that what cryptocurrency needs is for the United States to establish the regulatory ground rules for cryptocurrency, which will include clarifying the requirements for know-your-customer (KYC) reporting..

Then there’s a push to make the growing network of real-time payments networks up and running in multiple countries — as well as Clearing House’s RTP network and the soon-to-be-released FedNow network in the US — interoperable. “How do you argue that as a better alternative?” Webster asked.

“You’re dealing with a lot of different networks, and you still haven’t ruled out counterparty risks,” Husband replied. There are a lot of heterogeneous systems that try to be interconnected. There is still a lot of cost, a lot of risk, and a lot of counterparty involvement in those systems. But bitcoin is really working now.”

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