Is Cryptocurrency Still the Future of Borderless Payments?

Barchart · 10/18 04:57

From supply chain management to remittances and everything in between, crypto offers far greater accessibility and a much more seamless experience in transferring money. So why is it still so uncommon to see it in action?

Digital currencies like Bitcoin have emerged from their status as a niche investment product towards universal acceptance on Wall Street following the approval of Spot Bitcoin ETFs in January 2024.

However, data suggests that cryptocurrencies and stablecoins alike are uncommon payment alternatives at best. November 2023 saw less than 0.2% of global eCommerce transactions come in the form of cryptocurrency, and transaction volumes beyond borders show similar levels of scarcity. 

Despite this, the advantages of cryptocurrency payments remain clear in comparison to their fiat counterparts. So will the crypto revolution eventually extend beyond the confines of the investment landscape? The answer may be a little more complex than it first seems:

The Gateway to Cross-Border Payments

When it comes to cross-border transactions, cryptocurrencies have the potential to overcome many inefficiencies in the sending and receiving of money internationally. 

Today, fiat transactions can take between one and five business days to clear. Additionally, human interventions are typically required to verify the sender and recipient’s banking data for a number of purposes, including anti-money laundering (AML) and combating terrorism financing (CTF).  

Because of this, the speed of international payments is generally metered by the overlapping of business hours between the sender and recipient for B2B transactions and the respective local regulations in place. 

However, blockchain technology can help to facilitate far more seamless transactions in a fraction of the time on a 24-hour basis. Depending on the jurisdiction, the timing of payment could be limited only by local regulatory requirements

Rapid Payments

In terms of international trade, the potential of blockchain is virtually limitless. The high volumes of intermediaries used by traditional banking institutions can cause significant delays to transactions, but even long-distance transactions can be brokered almost instantaneously with the use of crypto. 

Because blockchain technology allows for direct transactions between businesses without any third-party interventions thanks to its transparent digital ledger framework, crypto payments can be brokered with no added operational costs. Because there’s no need for fees to be paid for banks and other institutions, these lower costs and reduced timeframes significantly improve business efficiency in dynamic industries. 

Another blockchain innovation, smart contracts, can be implemented to automatically action payments between two parties on the completion of pre-defined terms, such as the delivery of goods or services subject to quality control. 

With advanced global payout providers already supporting crypto payouts across a vast range of different cryptocurrencies including Bitcoin, Ethereum, Tether, and Solana, businesses can already benefit from a flexible infrastructure for the leveraging of borderless payments. 

Enhanced Security

Despite the lack of intermediaries, blockchain-powered crypto transactions also allow businesses to fully track and trace payments, with the available data permanently visible on the ledger. 

Not only can this help to enhance the transparency of international transactions, but it can also be utilized for far more comprehensive security for large-scale transactions. 

While this can help to solve many of the problems surrounding the safety of payments made in cash-based transactions, it’s worth noting that cryptocurrencies have long suffered from inefficiencies that are continually impacting their emergence as a leading alternative payment solution internationally. 

Countering New Challenges

Crypto’s path to becoming the future of borderless payments has been impacted by a number of inefficiencies surrounding criminal activity and regulatory responses to perceived threats from cybercriminal organizations. 

While cryptocurrency transactions are generally secure, their flexible nature has led to an increase in ransomware attacks demanding crypto payments to restore infiltrated computer networks. Organized crime gangs have also sought to utilize crypto to fund illicit activities and phishing attacks have led to more concerns surrounding consumer protection in recent years. 

More than $1.7 billion was stolen from cryptocurrency exchanges in 2023, with as much as $3.8 taken from users in 2022. These hacking incidents have long been a burden for international regulatory bodies to overcome, with many jurisdictions adopting a zero-tolerance policy surrounding the use of crypto within their borders. 

Long-standing environmental concerns over the carbon footprint of Bitcoin’s draining proof-of-work protocol are another major concern. 

2022 data suggests that Bitcoin may be responsible for 65.4 megatonnes of CO2 per year at an estimated carbon footprint of 0.19% of global emissions. This makes Bitcoin mining comparable to Greece’s annual carbon emissions. 

Another issue to consider is the sheer volatility of the crypto landscape, where the value of assets can rise and fall significantly with little warning, making business deals and remittances less efficient should the value of the cryptocurrency transferred be liable to significant shifts within hours of a transfer being made. 

Understandably, many government bodies have sought to remain sceptical over the adoption of cryptocurrencies for services. The US Securities and Exchange Commission may have approved crypto exchange-traded funds (ETFs) on Wall Street, but chairman Gary Gensler likened the landscape to the ‘Wild West’ and urged Congress to give the commission stronger oversight regarding the crypto ecosystem. 

Similar stringent measures surrounding crypto have been adopted by China, which accounts for most of the world’s Bitcoin mining to date. At least eight other nations, including Algeria, Bangladesh, Bolivia, Morocco, Nepal, Pakistan, Saudi Arabia, and Tunisia, have banned crypto, while others have restricted the use of digital currencies. 

The Bitcoin Problem

Perhaps crypto’s biggest hindrance stems from its most successful asset, Bitcoin. As the most dominant cryptocurrency today, Bitcoin has become synonymous with the wider landscape. But for an asset that was created in 2008, the framework surrounding Bitcoin is extremely slow and expensive to use. 

As an asset that has a capped circulation of 21 million, of which 19.75 million has already been minted, the coin’s scarcity undermines its functionality. Worryingly, it also undermines the functionality of other coins that are better suited to high-scale borderless transactions. 

Unlike Bitcoin, the crypto landscape’s second-most popular coin based on market capitalization, Ethereum, is far more sustainable and considerably more agile when it comes to rapid transaction times. 

More recent innovations like Solana have helped to leverage a low-fee alternative to Ethereum with the potential of hosting a vibrant decentralized finance (DeFi) framework that can help to leverage smart contracts, lending capabilities, and other tools that could support transactions beyond borders. 

Life Beyond Bitcoin

For the crypto landscape to truly realize its potential beyond the speculative investment connotations it has today, Bitcoin will need to take a step back from the limelight for other successful blockchain tokens to showcase their value in leveraging transactions. 

There are many challenges ahead for businesses and users alike to unlock the potential of rapid, secure, and low-cost overseas crypto payments, and the answers lie in cryptocurrency’s wider, vibrant ecosystem. 

In learning that there’s a wider world of functionality out there away from the inefficiencies of Bitcoin, more users and regulators alike can look to the benefits of crypto rather than its speculative nature and accommodate the benefits of blockchain technology sooner rather than later. 


On the date of publication, Dmytro Spilka did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.