Transforming the world takes time, even when innovations aim at just one part of it.
That, at least on the surface, appears to be the story with crypto and blockchain technology, which have together been honing their real-world utility within the traditional financial services and money-movement ecosystem for over a decade now.
But while the digital asset industry’s enthusiasts may have underestimated just how much inertia there is in the political and economic systems of the world’s major regions, that doesn’t mean that the innovative technology hasn’t been driving both change and real business value across the way that the world moves, manages and tokenizes value.
“Big banks and financial institutions are much more interested today than they certainly were five or six years ago, when we rolled out some products for the first time,” Brooks Entwistle, Senior VP of Global Customer Success and Managing Director at enterprise crypto solutions company Ripple, told PYMNTS. “You certainly almost never saw the boardroom when you brought up the topic of blockchain and especially crypto in the early days.”
At least part of the reason for the growing interest is because as the world becomes more and more digitized, the limiting fragmentation of a truly global economy without a truly global banking system increasingly starts to rear its head.
“This core problem of how long it takes to move money across borders, whether that’s a remittance situation where someone’s trying to get money from a Saudi Arabian oil field back to their family in South Asia or in the Philippines, or small and medium enterprise businesses who are doing payroll or paying suppliers – you’re being charged serious rates to move money across borders, and you also have an inability to track those payments and know they’ve arrived with certainty,” Entwistle explained.
As long as people and businesses are being charged fees of 6-7% to send money to various countries, there exists an attractive opportunity to bring that cost down while providing a better user experience.
“I’ve been building businesses in Asia now for 30 years. That problem is still here and is still a big one,” Entwistle said.
And the problem is only growing as companies around the world continue to expand globally, but find themselves increasingly running up against the legacy limitations of cross-border payment channels.
“As these businesses grow, it comes with the need to really move value faster, and in more places … the ability to use a digital asset as the bridge currency in this transaction between sender and receiver brings the whole kind of dream to fruition, because you are able to have a sender that can lock in an FX (foreign exchange) rate and have that settlement go across the blockchain to a receiver on the other end, and have an instantaneous conversion of local currency paid out to that local partner where the end recipient is waiting,” Entwistle explained.
In contrast to traditional methods that involve correspondent banks, one-way messaging and disproportionately high fees, blockchain-based cross-border payment solutions are faster, more transparent and more cost-effective.
“At the end of the day, so much of this is about capital being locked up in pre-funded accounts; in working capital stuck in multiple countries; in accounts on the other side of a trade in some minimal amount. The ability to move value around quickly — as opposed to locking it all in one place — frees up not just capital, but the energy and opportunity for growth in these businesses,” Entwistle said.
Still, despite the technology being available and mature, what’s crucial for broader adoption of blockchain-based money movement vehicles and commonplace crypto liquidity bridges is solving for a global patchwork of non-interoperable regulations policing the industry.
“We cannot do this unless we go into new markets and new countries and have a dialogue with the regulator first and explain to them what we can bring to this market, what we can bring to their business community, what we can bring to their end consumers and therefore citizens,” Entwistle said. “If you don’t have that, things get stuck in a way that ultimately just constraints growth.”
In an era where secure financial transactions are paramount, the importance of having the right individuals on a payment network cannot be overstated. Trust is the foundation that helps reduce risks and ensures the smooth functioning of the financial ecosystem.
“I came out of another network business — the ride-hailing business — and you’re only as strong in a network situation as the weakest point in that network. If something goes wrong or a bad actor gets on that, it’s a big problem for everyone involved. So, at Ripple, we take the onboarding process extremely seriously. It’s a lengthy process. And what it enables us to do is to have this 70-country network, which you can’t build overnight,” Entwistle explained.
As for what the Ripple senior leader sees in the future?
“There’s lots of movement that trading companies do across borders, with payments needed at many stops along the way. We think that is a real opportunity, but there are two other areas where Ripple sees real opportunity in and where we’re building businesses around: central bank digital currencies (CBDCs) and real-world asset (RWA) tokenization,” Entwistle said. “They’re both exciting spaces where the real-world benefits of blockchain and digital assets can find a home.”
“If you think about some of the opportunities in the equity markets and fixed-income markets around the world to tokenize financial assets and corporate bonds, the settlement of which is extremely onerous and takes forever, it is extremely exciting.”.