Aug 18, 2023 1 min read

Executive Summary: The Role of Crypto in Cross-Border Payments: The Ultimate Comparison

In this article, I compare different options for cross-border payments including traditional banking, fintechs, CBDCs, Bitcoin, and stablecoins. I analyze the mechanisms, pros and cons of each method to send international money transfers.

Summary: The article compares different options for cross-border payments including correspondent banking, fintechs, CBDCs, Bitcoin, and stablecoins, analyzing their mechanisms, pros, cons, and ability to provide fast, inexpensive international money transfers.

What cross-border payments are:

Transactions between parties in different countries and currencies.
Includes retail (P2P) and wholesale (bank-bank).

How correspondent banking works:

Uses intermediary banks to facilitate currency exchange and settlement.
Relies on nostro/vostro accounts between banks.

Pros and cons of correspondent banking:

Well-established but expensive, slow, cumbersome.

How fintechs facilitate payments:

Leverage direct access to settlement systems, fewer intermediaries.
Faster and cheaper than traditional banking.

Pros and cons of fintechs:

Convenient, gaining market share. But liquidity and regulatory issues.

CBDCs for cross-border payments:

Enable fast settlement between CBDC systems.
But concerns around privacy and financial stability.

Pros and cons of Bitcoin:

Fast, inexpensive, outside money. But volatility, liquidity issues.

Pros and cons of stablecoins:

Price stability, efficient. But oligopolies, frozen transactions.

Full article: