Why Blockchain Payments Are Making a Strong Comeback
As 2024 draws to a close, blockchain payments are regaining traction, with major financial institutions stepping up their support. Here’s a look at key developments:
September 26: BlackRock partners with Ethena to issue USDb, a USD stablecoin.
October 3: PayPal completes its first stablecoin transfer (PYUSD) with EY, and VISA announces VTAP, enabling independent stablecoin issuance for institutions.
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 new payment system to rival SWIFT.
October 24: Coinbase and A16Z invest in Skyfire, a blockchain-AI integrated payment firm.
These advancements contrast sharply with the skepticism blockchain faced a few years ago when projects like Meta’s Libra encountered regulatory hurdles. Today, blockchain payments are experiencing renewed momentum. Here’s why:
Blockchain Payments’ Advantages in Cross-Border Transactions
Blockchain payments streamline cross-border transactions by allowing secure, transparent exchanges across diverse financial systems, reducing reliance on intermediaries that slow processes and add costs. Blockchain’s distributed ledger technology enables real-time updates, significantly lowering transaction costs. For example, the Bank for International Settlements’ mBridge project demonstrated that blockchain could reduce cross-border payment times from days to seconds, with fees near zero.
With around 560 million digital currency holders and 82 million active blockchain payment users globally, demand for blockchain-based transactions is growing. By Q3 2024, public stablecoin payment volumes reached $1.8 trillion monthly, moving beyond speculative trading as real-world applications expand.
Challenges to Blockchain’s Wider Adoption
1. Political Pressures:
Some governments resist blockchain adoption, concerned about its impact on traditional financial systems. For example, the U.S. has discouraged projects like mBridge, fearing effects on SWIFT and the U.S. dollar’s global standing.
2. Institutional Resistance:
Many banks limit blockchain initiatives to experimental departments, wary of the impact on their established business models.
3. Media Skepticism:
Negative media coverage often associates blockchain with speculation and illegal activities, discouraging broader public adoption.
Why Blockchain Payments Are Here to Stay
1. Competitive Advantages:
Blockchain’s cost and performance benefits are significant, often thousands of times greater than traditional systems, making its advantages difficult to overlook.
2. Evolving Regulatory Understanding: Regulators are recognizing blockchain’s potential for real-time compliance and programmable smart contract enforcement, as seen in Singapore’s Ample FinTech initiative. Prominent figures, like Zhou Xiaochuan at the October 2024 Financial Street Forum, now acknowledge that blockchain projects like mBridge could complement established systems.
3. Global Competition:
With rising geopolitical tensions, no single power can prevent blockchain’s development, as nations adopt it to remain competitive in a rapidly evolving tech landscape.
4. Applications Beyond Finance:
Blockchain’s applications are expanding into sectors like data management, organizational collaboration, and even defense. As adoption broadens, blockchain could transform industries much like the internet did in the 1990s.
In conclusion, blockchain payments are not just making a comeback they are poised to lead a new era of efficient, cross-border value exchange. Despite resistance, blockchain’s advantages make it an indispensable part of the future financial landscape and beyond.
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