In a recently contributed piece for Forbes, Daniel Webber, founder and CEO of FXC Intelligence, discusses how the “crypto winter” has impacted many start-ups that have sprung up in the cross-border payments space in the past few years.
The article mentions that the potential dampening of this market is based on the regulatory framework that was just released by the U.S. Treasury Department, in response to the March 2022 executive order from the White House—which we have commented on. This causes crypto companies to look for profit opportunities and one area of obvious interest is cross-border payments given the FX implications.
The author questions the conventional wisdom around cryptos being cheaper and faster (overall just better) than traditional fiat methods. An example of the cheaper general belief, which he says is disputable given the underappreciated costs of moving value between wallets. He suggests that in many cases, traditional and crypto FX costs can be very similar, depending on the supporting cast behind the transactions. He then goes on to discuss potential crypto benefits, especially for remittances. The point being that cryptos are generally much more volatile than fiat currencies in longer windows, but sometimes less volatile in shorter timeframes (i.e.; Sri Lankan rupee)—and with the speed of crypto settlement versus traditional money transfers, it can be a differentiator.
The article also focuses on CBDCs as a real next step, so worth a read for interested parties.
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.