As finance gets less centralized, cross-border payments get better
The Financial Stability Board recently detailed the impact of decentralized financial technology, giving a boost to transactions such as cross-border payments.
The report says distributed ledgers can improve performance for cross-border payments and serve as a disruptive force. The findings of this FSB report indicate that decentralized finance has the potential to significantly reduce factors in the traditional financial world which often hinder financial stability.
The potential for emerging technology to aid and reshape financial systems is already being recognized, as the report shows that global investment in fintech rose to a record $112 billion in 2018.
Decentralized finance will lead to greater competition and diversity in the financial system and reduce the systemic importance of large, existing entities.
The report also highlights the issue of cross-border payments, which are famously slower and more costly than domestic payments. Continuous innovation in the distributed ledger technology space is already providing disruptive solutions. The proliferation of stablecoins, acting as a bridge between the traditional and digital economy, can provide more seamless methods of conducting international remittances on-chain, eliminating costs and waiting periods.
Also, a very good note is that tokenization of assets doesn’t guarantee liquidity. Liquidity is driven by the market, not necessarily by some digital representation. We take this very seriously in the development of our Neutral products to ensure that investors can manage their exposures effectively when they engage with the broader Neutral ecosystem.
In tandem with drawing focus to decentralized finance’s ability to improve and stabilize economies, the report calls out valid concerns, such as uncertainties regarding investor protection in the crypto asset sphere. Combating these concerns will require the decentralized financial industry being explicit and defined in its utility.