Near instantaneous settlements have long been a dream among crypto enthusiasts but now those high expectations are finding their way into traditional finance, according to an analyst.
On this week’s episode of Yahoo Finance Future Focus, BCB Group chief product officer (CPO) Ashley Pope, talked about the near instantaneous settlement speeds characteristic of cryptocurrencies and the implications might be for so called traditional finance.
Pope highlighted how blockchain technology is prompting traditional market players to adapt in order to meet evolving client demands.
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“The near instantaneous speed of settlement expectation in the cryptocurrency sphere is percolating into traditional finance, and ultimately, where we’re moving to a world where value moves around at the speed of the Internet,” Pope said.
Settlement speeds: from seconds to days
Existing bank transfers can range from being near instant across networks like FPS in the UK, and FedNow in the US, to taking days to settle across the SWIFT network.
“Near instant bank transfers are limited to certain countries and suffer from maximum transaction amount limits. And Visa, whilst payment acceptance is within seconds and geographic coverage is broad, funds can take days to settle to the actual merchant,” Pope said.
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The BCB Group executive added that in contrast to traditional settlement methods, blockchains like the Ethereum network take only seconds to settle. “These blockchains are available globally as long as there is an internet connection, and they don’t have transactional limits. It’s possible to frictionlessly send $1bn in USDC stablecoin (USDC-USD) from Canada to Australia in less than a minute,” he added.
To bridge the gap, traditional financial institutions are exploring innovative solutions. Visa (V) has introduced a stablecoin settlement for merchants and JP Morgan’s (JPM) launched initiatives such as Onyx, its blockchain-based platform for wholesale payments. Additionally, the UK government’s plan to oversee fiat-backed stablecoins signifies a broader trend towards embracing crypto-inspired mechanisms for settlement.
“A number of traditional financial institutions that are now using blockchain technology to help decrease transaction times and improve global transactional reach. Firms leading the charge include Paypal, Visa and Société Générale with their Euro Stablecoin,” Pope told Yahoo Finance UK.
Blochain is delivering a range of settlement options
Discussing the options for instant settlement that are becoming available, Pope highlighted the emergence of stablecoins, native cryptocurrencies like bitcoin (BTC-USD) and Litecoin (LTC-USD), as well as existing payment rails such as FPS in the UK and SEPA in Europe.
Moreover, blockchain providers are offering cross-border payment solutions, exemplified by Ripple’s On-Demand Liquidity service.
On Ripple and XRP’s (XRP-USD) appeal to traditional financial institutions, Pope said: “Ripple and the XRP ledger as a means of value transfer is actually highly effective.” He emphasised the technology’s potential utility for financial institutions seeking efficient cross-border transactions.
UK’s ambition as a global crypto hub hangs in the balance
On the regulatory front, Pope acknowledged that the UK initially lagged behind the EU in crypto regulation. However, he noted recent progress towards establishing clearer frameworks, citing the UK’s proposed legislation as a step towards providing certainty for market participants.
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However, Pope said that concerns linger regarding the impact of regulatory uncertainty on the UK’s ambition to become a global crypto hub. He cautioned that without clarity, foreign investments in the UK’s crypto and blockchain sector might divert to more regulated jurisdictions in Europe.
The BCB Group executive noted that as traditional finance integrates crypto-inspired payment innovations, regulatory certainty has emerged as a crucial factor in ensuring the UK’s competitiveness on the global stage.
Watch: What is a spot bitcoin ETF and why it has sparked a crypto rally? | Future Focus
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