IAMTN Report Backs Cryptocurrencies as 'Good Alternative to Traditional Settlement’

IAMTN Report Backs Cryptocurrencies as 'Good Alternative to Traditional Settlement’

The latest report by the International Association of Money Transfer Networks (IAMTN) has said cryptocurrencies can be a good alternative to conventional settlement processes because they are supported by blockchain technology, which enables the instant finalization of transactions without the involvement of intermediaries. Some players in the cross-border money transfer sector perceive the blockchain and cryptocurrencies as technologies that can enhance remittance processes.

Cryptocurrencies Enable Low-Cost, Instant Transfer of Money

The IAMTN report has said using cryptocurrencies for the settlement of transactions can be a useful "alternative to traditional settlement processes." This is because the blockchain technology that supports cryptocurrency transactions settles them instantly without the need to go through intermediaries like correspondent banks.

The combination of declining correspondent banking relationships and the rising volume of cross-border transactions further highlights the importance of the blockchain for not only lowering the cost of remitting funds but making the transfer of money across borders much quicker.

"Cross-border transactions can be settled almost instantly, thus obviating the need for pre-funding accounts in receiving countries, which is an expensive practice for remittance providers. Several businesses, ranging from traditional remittance service providers to cryptocurrency fintech, are using blockchain technology to improve remittance processes, "explains the report.

The report also includes the findings of a study by IAMTN which sought industry players’ views on innovative technologies which can improve the process of sending funds across borders. As mentioned in the report, both the blockchain and cryptocurrencies are seen as innovations that "bring an infinite number of possibilities in the realm of cross-border payments."

The IAMTN study has revealed that open API and artificial intelligence (AI) are the other two technologies perceived to have the potential to improve the remittance process. Besides disrupting the financial industry, many of these new technologies can "permanently improve the infrastructure behind cross-border payments in the interest of end-users."

Regulatory Uncertainty Slows Adoption of New Technologies

Nevertheless, the report said remittance services providers that are keen on integrating new technologies into their operations often encounter challenges in the form of rigid national regulations or the absence of any laws that govern such technologies. According to IAMTN, the fact that only a few countries regulate the use of blockchain creates "some level of uncertainty for businesses that use, or would like to use, this technology."

The report also said barriers, such as accessibility, lack of awareness, literacy, and trust, often work against new technologies and may seem unattractive even when their use results in significant savings. Therefore, to overcome some of these challenges, the IAMTN urges policymakers to tailor their solutions to these realities.