Blockchain Technology in Cross-Border Payments

Blockchain plays a crucial role in financial services, including cross-border payments. The technology offers a more secure and cost-effective alternative for international businesses than traditional financial systems — this is why it is becoming increasingly relevant. In this article, we explain in detail how blockchain technology in cross-border payments works, explore the method’s pros and cons, and share use cases and the most accepted cryptocurrencies for businesses.

How Do Blockchain Enables Cross-Border Payments?

Blockchain in cross-border payments ensures a secure and transparent process. The technology uses a distributed ledger to record and verify transactions, allowing settlements to occur almost instantly. Unlike traditional financial systems, relying on intermediaries such as banks, the blockchain significantly speeds up transactions and reduces their costs. For example, crypto payments are processed in seconds to minutes, while traditional ones can take up to several days. These features make payments in cryptocurrencies attractive both to businesses for international transfers and individuals to send money to friends.

Some networks use smart contracts to automate transactions when certain conditions are met. All financial process parties have access to transaction records, which are also immutable. This reduces the risk of errors and fraud, instead of which it builds trust.

Pros and Cons of Cryptocurrency Payments

Let's now look closer at the cryptocurrency payments’ advantages and disadvantages — they are in the table below.

Role of Stablecoins

Some of the widely accepted cryptocurrencies are stablecoins. They can be used as both the main currency for transfers and for conversion into them. Moreover, stablecoins can be easily withdrawn in any country via P2P platforms or exchanges.

Why stablecoins? Because they offer the digital currencies’ benefits while protecting against volatility, as they are pegged to the fiat currencies’ value (e.g., the US dollar) or a basket of assets. This connection makes stablecoins a reliable exchange method and an attractive option for merchants. The most widely used stablecoins include USDT and USDC, both pegged to the US dollar.

Cryptocurrency Use Cases in Payments

As we said, crypto payments are used by many businesses, including international ones. At the same time, crypto can be used both between companies and consumers. Below, we discuss the use of cryptocurrency payments in each case.

P2P

People can conduct private transactions with each other, for example, on marketplaces or in chat rooms for exchanging goods and services. In this case, cryptocurrency becomes a payment method, especially when dealing with people from different countries.

Here's a quick overview:

• Step 1: Register on a P2P exchange, complete KYC, and enable 2FA to protect your account.

• Step 2: Set up filters to search for suitable ads or create your own ad. Find a trading partner, agree on a deal, and complete the transaction by sending your fiat money to them and receiving the crypto. The advantage of P2P exchanges is that the platform blocks crypto in an escrow account, and the seller will get his funds only after payment confirmation.

• Step 3: Now that you have the crypto, return to your transaction. Ask for the recipient’s wallet address and transfer the coins there.

You can also accept crypto for your goods or services in the same way. If necessary, you can withdraw the received funds into fiat by selling them on a P2P platform or through other methods.

Crypto also solves the problem of a local currency while you travel: you have only to buy crypto on P2P and sell it in the country for cash or in the e-wallet to get the local money. Another option is opening a crypto card, which automatically converts your crypto to the local currency. Then, you may pay with it just like with a regular one.

B2B

Businesses also send cryptocurrency between themselves. Here are the most common B2B use cases for cryptocurrency:

• Invoicing. Companies invoice and receive payments for their services in crypto.

• Payments for services. Businesses pay contractors or employees in cryptocurrency — for example, this is especially common among software companies.

• Supply chain payments. Blockchain is used over the entire supply chain, from raw materials to finished goods. In other words, companies may monitor the products’ way and then pay employees in crypto at every level.

• Escrow services. Crypto is often used in escrow services for B2B transactions, so funds are held in the account until both parties fulfill the agreed-upon terms.

• Cryptocurrency loans or credit lines. Companies offer loans to others in crypto, ensuring faster access to capital. This is actively used by startups.

• Asset tokenization for investment. Companies tokenize their assets (e.g., real estate or intellectual property) and offer them for investment through crypto. This way, they raise funds without middlemen, and investors participate directly in asset investments.

Top Cryptocurrencies for Cross-Border Payments

Now we move to the most popular assets for cross-border payments. We'll cover the stablecoins Tether (USDT) and USD Coin (USDC) and the market giant Bitcoin (BTC).

• Tether (USDT). This is the most widely used stablecoin, pegged 1:1 to the US dollar, making it a favorite among companies and entrepreneurs. While it aims to reduce volatility risks, it's important to follow the fiat dollar exchange rate, which also fluctuates slightly.

• USD Coin (USDC). USDC, like USDT, is pegged to the US dollar value and, in this sense, is analogous to Tether. At the same time, USDC is issued by regulated financial institutions, ensuring compliance. This fact makes it attractive to companies that see compliance as their main priority. This aspect sometimes raises doubts about its decentralized nature, but it still operates on the blockchain and has its advantages.

• Bitcoin (BTC). Bitcoin is favored as the very first and market-defining cryptocurrency. Due to its widespread adoption, it's even more chosen for cross-border payments. BTC is a reliable option, as it has robust security features, but its high volatility is also important to consider — it can either decrease or increase your final profit.

We've covered everything about cross-border payments using blockchain technology and crypto. Do you have any questions for now? Ask in the comments, and we'll help you immediately!