What contribution are blockchain technology and cryptocurrencies already making in global payments today and where will they go in the next few years? The new Ripple report provides information.
Ripple has in the current Blockchain-in-Payments-Report Focused on the state of the art in blockchain technology and the added value of digital currencies in cross-border payments. The diagnosis: You are on the right path, but still have a long way to go.
According to the Ripple report, for which 854 participants from 22 countries were surveyed, the demand for digital payment solutions has risen continuously over the past five years. At the corporate level, cryptocurrencies are increasingly seen as a “viable option” “to increase the speed and efficiency of cross-border payments.” At 99 percent, the overwhelming majority of respondents said that crypto assets could optimize payment transactions — an increase of five percent compared to 2018.
The motives for this can be of different nature. Some companies emphasize the advantages of blockchain technology in payments, such as real-time transactions or the financial inclusion of disadvantaged population groups, while others emphasize the potential for opening up new payment channels and company expansion in other countries.
Not surprisingly, interest in digital payment solutions is highest among early adopters. But at 82 percent, the interest in the use of digital assets among companies that are not involved in any pilot project or proof-of-concept is extremely high.
Blockchain-based payment systems do not only have added value for companies. They are a win-win situation for customers and providers alike. As a result, nearly half of the respondents believe that “digital assets add value to their customers”. After all, there are the same advantages for customers as for companies: Cross-border transactions at low cost in real time. The additional costs usually passed on to customers, which arise, for example, when monetary values are transferred between financial institutions, are eliminated through the use of appropriate payment systems.
When asked about the most suitable means of payment, however, preferences have shifted since the last survey in 2018. While the top 3 of the largest cryptocurrencies by market capitalization led the ranking of the most popular assets two years ago, digital versions of local currencies are increasingly moving onto companies’ wish lists.
These can be digital central bank currencies (CBDC), or stable coins covered by fiat reserves. While Bitcoin and Ethereum in particular have fallen in favor, the desire for cryptocurrencies that are issued by government institutions has become louder in recent years.
According to the report, “interoperability, regulatory clarity and low volatility risk” are the three pillars of “long-term success for CBDCs.” It is crucial, however, that the “gap between the various CBDC initiatives and the existing national and international systems as well as other digital currencies” can be overcome in order to enable the integration and the “smooth exchange of values between CBDCs” in global payment transactions.
I also express the desire for stable assets in the biggest criticism of the crypto ecosystem. The majority said they had confidence in how cryptocurrencies worked. At around 61 percent, however, a large percentage cites the naturally high volatility of crypto assets as the greatest obstacle.
Overall, the Ripple report shows that blockchain technology and cryptocurrencies are becoming an integral part of the global payment infrastructure. Overall, there are still “concerns about a lack of regulatory clarity, implementation costs and security.” But the framework is created by appropriate legislation. In addition, the industry is maturing through financial institutions and government agencies that are increasingly addressing the issue. Last but not least, the pandemic is causing a rethinking and digitalization push on a broad front, from which the emerging countries in particular would benefit.
Auditor PwC recently cast in numbers how great the economic benefits of blockchain technology are . According to this, the added value of blockchain applications across industries could amount to over 1.76 trillion US dollars in the next ten years. Applications in the areas of value chains, financial services and identity management therefore have the greatest potential.
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