We live in a world where imaginary lines, known as borders, separate humans on various levels. Aside from physical separation, each country can be considered financially different, making money transactions difficult or, in some cases, impossible.

In this article, we will deal with the issue of cross-border payments and explore the possible solution that could help us improve the global economy.

What are cross-border payments?

Cross-border payments refer to money transactions from one country to another. Governments need to monitor the money that enters and leaves their countries, which is why some of them make it difficult to send and receive foreign funds.

If two or more nations are in an economic union (the European Union, for example), cross-border payments become easier.

The problem is that some countries are the complete opposite of an economic union. Some have sanctions imposed, Russia being an (un)popular example.

But what about countries with few or no economic relationships? This group includes most of the countries in the world, and that is why the current cross-border payment solution is not considered efficient.

the old road

If you’re following the news about Russian sanctions, you’ve probably heard that the country has been banned from the SWIFT network.

SWIFT is the official network for international money transfers, which allows banks in different countries to communicate with each other and send/receive money.

The network was created in 1973 and has been updated many times. The network currently has 8,000 financial institutions in 208 countries and is the most popular option for cross-border payments.

SWIFT is far from ideal as it is slow and expensive. We live in a world where instant money transfers are necessary for many people, and SWIFT sometimes takes days, depending on the respective countries of the sender and recipient.

The crypto path

As soon as cryptocurrencies emerged, financial experts recognized their importance for cross-border payments. As you know, we can send Bitcoin anywhere in the world.

They will receive it in minutes in a direct peer-to-peer transaction without using SWIFT or any other intermediary to facilitate the transfer.

Although better than SWIFT, cryptocurrencies come with their own set of problems. Therefore, cryptocurrencies are still not considered the best solution.

First, there is the lack of interoperability between chains, which can be compared to the cross-border problem.

Different cryptocurrencies based on different blockchains cannot communicate with each other. You cannot have Bitcoin stored on the Ethereum chain and vice versa.

Many projects are working to improve this, one of which is t3rn. It offers a creative solution for executing interoperable smart contracts.

Additionally, it has a smart contract registry that can help developers who contribute to it get paid every time someone uses their contract.

The second problem with crypto is that it is not yet regulated. At some point, countries will have to use the benefits that cryptocurrencies offer and regulate the parts that could lead to scams, money laundering, and terrorist financing.

Whether we like it or not, cryptocurrencies paved the way for all of that, so they need to be regulated to some degree. But regulation has only just begun, and we are yet to see what will happen.

Finally, cryptocurrencies are highly volatile, so using them as a default means of cross-border transfers might not always work for everyone involved.

XRP saves the day

One of the cryptocurrencies that stands out is XRP, which is the official cryptocurrency of Ripple. Ripple is now simply described as a global payment network for financial institutions.

Like SWIFT, it aims to partner with banks and other financial institutions around the world and create a network where cross-border money transfers are possible, except that these institutions will be able to enjoy the benefits that cryptocurrencies offer. Indeed, Ripple solves the two main problems with SWIFT, as it is fast and very affordable.

Ripple is not there yet, and it is not certain if it ever will be. However, the team behind it works hard to expand the RippleNet decentralized network by adding new institutions and testing various possibilities to make the idea behind Ripple a reality.

final thoughts

In short, cross-border payments are not as fast as they could be. Information can travel anywhere in the world in seconds and money transfers sometimes take days with SWIFT.

That slows down the progress of various businesses and individuals as instant money transfer is often crucial. Fortunately, there are several other alternatives, and crypto is one.

Some crypto projects, such as Ripple, even have concrete plans to replace current cross-border payment methods.

This post What is the best way to make them quick and easy?

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