Using Blockchain To Improve Cross-Border Remittances

Blockchain, at least to some observers, is synonymous with cryptos. And cryptos, of course, are synonymous with volatility.

But in an interview with PYMNTS, Josh Li, chief business officer of Roxe, said that businesses and individuals can take advantage of speeding up and streamlining cross-border remittances in a way that marries blockchain technology with traditional finance, while sidestepping the challenges of legacy settlement infrastructure and practices.

Roxe, an open global payment network, uses the blockchain to transfer value instantly on the company’s Roxe Chain.  The company maintains that the chain can also deliver customizable KYC/AML solutions to financial institutions (FIs) and other users.

Late last month, the company said it is working with IPAY, adding the latter firm to its “node” system to enable cross-border remittance flow between the U.S. and India.

An Attractive Market

Li said that India represents an attractive market for cross-border payments, and especially blockchain technology because it stands as the “number one” country for inbound volume for those payments. He cited World Bank’s estimate that inbound volumes last year were $83 billion.

But costs are high. Li noted that according to some estimates, no matter what the corridor may be, it can cost more than 5.4 percent to send $200 to India.

“One of the design principles of Roxe’s platform is to charge no more than 1 percent,” Li told PYMNTS. “So if we apply the 4.41 percent difference in cost of remittance to India’s $83 billion, the existing global remittance model with its many intermediaries added an additional cost of $3.7 billion to consumers.”

In terms of the mechanics of a cross-border remittance using the IPAY Roxe node, Li noted that the Roxe network runs on Roxe Chain, a hybrid permissioned blockchain that is purpose-built for payments.

“IPAY will become a settlement node on Roxe and will serve as an off-ramp for local fiat remittances,” he said. “Customers will now be able to have full transparency and make better business decisions since they will have more immediate access to their funds.” Payments settle in seconds rather than days, he added.

With a nod to the fact that transactions are done with fiat (as opposed to cryptos, which tend to be lumped together with blockchain by at least some observers), Li said that “two of the goals of the financial regulators in a given country are to ensure financial stability and also to protect its citizens. India is no exception.”

Thus far, there’s been a challenge in embracing cryptos (no matter which market), because there are still questions surrounding the quality of specific tokens and whether prices can be easily manipulated.

“We encourage central banks and other government entities not to ban or restrict cryptocurrencies outright, but to establish clear and transparent guidelines around the trading of cryptocurrencies between each other and with fiat currencies,” Li told PYMNTS.

At a high level, the blockchain networks store multiple copies of transactions (or databases) across hundreds — or even thousands — of networked machines. Even if one machine is somehow hacked, it’s nearly impossible to bring the entire network down, as data is stored in such a vast, decentralized way.

Better Transparency

As Li noted, blockchain is especially useful for the cross-border settlement of payments and remittances, as it attacks the specific pain points tied to those transactions.

“Today’s international settlement systems for payments and remittances are too slow, too expensive and too risky,” he maintained. Those inefficiencies come amid a series of middlemen, such as intermediary banks and payment platforms, which make it difficult to track payments. The current legacy systems also offer only limited transparency for pricing and for counterparty identities. Smaller and local regional banks are also unable to provide global services, which are key to cross-border activity.

“Since blockchain removes many costly intermediaries, it is also much faster (settling in seconds instead of days), and less expensive than traditional, centralized payment systems,” Li explained.

He also noted that with Roxe, the firm’s members enjoy the benefits of blockchain technology, without the volatility and other risks of directly transacting with cryptocurrencies.

Roxe also supports cryptocurrencies and stablecoins as other underlying asset classes that can be sent and received over its payment platform. The platform, said Li, “is flexible and enables its customers to immediately benefit from blockchain technology, regardless of whether the underlying asset is a fiat, a classic cryptocurrency or a stablecoin crypto.”

Looking Ahead To CBDCs

Looking ahead, Li said that central bank digital currencies (CBDCs) will be a “major catalyst” to help catapult domestic and cross-border crypto payments into the mainstream. Roxe has announced a free program for 119 developing countries to issue their own CBDCs on the Roxe platform.

“With the right technology, CBDCs can not only make payments much faster and less expensive, but also more interoperable between payment platforms and various financial institutions,” said Li. “CBDCs will also serve as a critical entry point into DeFi liquidity pools, which are a more efficient, equitable way for participants to earn returns on idle capital and get better wholesale FX rates.”

Asked by PYMNTS about short- and longer-term roadmaps, Li said that in the short term, the firm will seek to “open” the corridors that are most widely used for cross-border remittances. “We’ve already announced partnerships for several other countries, and we’re committed to opening up additional high-volume countries such as China and the Philippines,” he said. “Our long-term vision is that the Roxe network will be available in every country. We believe that advances in blockchain technology should fundamentally change how global payments are done, making payments almost instant and very low-cost.”

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