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How the Biggest Money Experiment in Human History Will Impact Global Payments

How the Biggest Money Experiment in Human History Will Impact Global Payments

Decentralized finance adds value by making it easier to validate quantifiable economic decisions. It has proven successful because an automated trust mechanism for simple or complicated transactions offers straightforward criteria for quantifying the benefit of the choice. 

Keep in mind that the legal status of this type of business entity is often unknown and may vary depending on the jurisdiction. The Securities and Exchange Commission of the United States concluded in 2017 that DAOs could be regarded as illegal offers of unregistered securities. 

Despite this, Wyoming became the first U.S. state in 2021 to recognise DAOs as legal companies, with CryptoFed DAO being the first business to do so. A DAO can operate as a corporation without having legal status; it is often and legally known as a general partnership. 

Although this collaboration strategy may be legal, any known participants or individuals at the interface between a DAO and traditional (regulated) financial institutions may be subject to regulatory action if they violate multiple laws.

Blockchains and global payments: yesterday, today, and tomorrow

For too long, the payments area has contended with difficulties of high cost, lack of transparency, limited speed, and accessibility. The payments system has traditionally relied on trusted sources (a.k.a. “middlemen”) and third parties to function as crucial facilitators in transaction processes. Because each vendor or middleman takes a little cut or fee, these facilitators raise the cost of transactions. 

Furthermore, traditional payment mechanisms are far more time-consuming and difficult. In addition to international payments taking days to complete, the challenge of working hours in different timezones, and the need for oversight and translators 24 hours a day, seven days a week, including weekends and holidays, they are far more vulnerable to holdbacks and fraud due to a lack of transparency.

Think back to 2018, when over 78% of organizations reported a case of fraud in B2B payments.  

Today, blockchain technology provides all customers in the financial sector with lower prices, faster transaction speeds, better security, and complete transparency. Merchants and retailers who used to rely on middlemen to transfer money from point A to point B now have greater responsibility, transparency, and cost and speed improvements. 

As digital payments continue to perform admirably in developed countries’ markets, the movement is paving the way for faster cross-border payments and worldwide transfers. Cross-border payments are currently cobbled together clumsily. However, with the introduction of digital payment systems, we will witness the birth of a world-changing, frictionless process that will permanently change the way we interact with value across boundaries.

Transforming global commerce

According to a recent Insider Intelligence analysis, 5.5 million U.S. adults, or 2.3% of U.S. Internet users, would use digital currencies and cryptocurrencies to make payments by 2023. 

With significant players like Visa, MasterCard, Strike, Stash, and many more quickly entering the digital payments arena, one can only speculate on the influence of blockchain technology on the financial system. Digital currencies, currency tokenization, stablecoin issuance, on-chain transactions, and other enablers are all significant players in the broad adoption of digital payments and currencies. 

Multinational corporations and financial institutions are just a few of the entities vying for a piece of this pie. 

Every major bank in the world is currently considering or experimenting with digital payments in order to remain competitive, inventive, and relevant. 100% of the world’s banks are waiting for clarity, and 90% are waiting for regulatory approval. While smaller, less visible banks are being held back by their risk appetite or confusing rules, they are gradually forging their way into the new world of digital payments.

These impediments, however, will soon become obsolete as stablecoin regulators aggressively drive the regulatory movement forward and open doors globally.

When it comes to digital asset payments, the glass is half full

Regardless of where you stand on the contentious issue of blockchain technology and its impact on the global payment system, it is impossible to deny that digital currency technology is here to stay. With every bank and firm considering or racing toward digital currencies, the only question is who will cross the finish line first. 

Having said that, growing participation from both developed and developing countries has the potential to yield significant benefits due to the global influence of blockchain technology. Within the next five years, the globe will see a proliferation of consumer enablers, as well as several of the world’s most prestigious banks diving headfirst into what will soon be the future of banking.

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