Blockchain-based payments hold promise in delivering seamless transactions for all. As the space continues to evolve and mature, the question arises: what can we expect in terms of mass adoption?
Rita Martins, a Web3 and blockchain expert, author, and former Global Head of FinTech Partnerships at HSBC, sheds light on the subject in her book “Web3 in Financial Services.” Martins also shares her insights through her weekly newsletter, Web3 Crossroads. During a recent appearance on Converge from Money20/20, she discussed the technological shifts Web3 and blockchain bring to the table, their potential in payments and other financial services, as well as the obstacles to greater Web3 adoption and compliance.
Martins emphasizes the importance of showcasing the positive aspects of blockchain technology in financial services, rather than focusing solely on the negative aspects like collapses and problems faced by certain platforms. She points out that the technology has come a long way since her early attempts to introduce blockchain to HSBC, with more banks now recognizing its value and experimenting with its applications.
One area Martins highlights in her book is the use of stablecoins in emerging markets for cross-border remittances. She explains how stablecoins are making remittances faster and cheaper for individuals working abroad who send money back home to their families. This technology has the potential to significantly impact the financial systems of less developed markets in the short and long term.
Furthermore, Martins discusses the tokenization of real-world assets, where assets like real estate, stocks, and bonds are converted into tokens and traded on a blockchain. This trend opens up new avenues for borrowing against these assets and creating liquidity. Major players like BlackRock are already exploring tokenization, with the issuance of a Bitcoin ETF and the launch of a tokenized fund on a public blockchain.
Central bank digital currencies (CBDCs) are another topic of interest for Martins, who acknowledges the challenges surrounding privacy and data collection. Educating consumers about CBDCs and ensuring privacy layers are in place are crucial steps in their adoption. Additionally, the governance and regulatory hurdles faced in cross-border payments could pose challenges for international operations.
Overall, Martins believes that financial institutions will fully embrace Web3 technologies once more regulations are in place and advancements in technology address issues like transparency and privacy. She envisions a future where public blockchains evolve to incorporate privacy and compliance layers, paving the way for a globally interoperable financial system. Interoperability between different blockchains and legacy systems is key in leveraging distributed ledger technology. Fintech companies are focusing on compliance to ensure ISO 20022 compliance as they prepare for greater interoperability.
In the world of decentralized finance (DeFi), projects with a decentralized autonomous organization (DAO) governance structure are looking to register as entities. This allows them to connect and partner with traditional finance, tapping into liquidity. Compliance, privacy layers, and other requirements are essential for engaging with traditional companies.
As blockchain technology evolves, consumers may not even be aware of whether they are using blockchain or traditional financial services. Blockchain will become just another tool in the toolbox for banks and financial services companies, much like cloud or on-premise solutions.
To stay informed on the future of cross-border payments, tune in to Converge for new episodes every Wednesday. Additionally, register for the Daily Market Update to receive the latest currency news and FX analysis directly to your inbox.