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Payments Will Move to DeFi as Regulation Breaks New Ground

03.08.2021

Full steam ahead for B2B Payments as DeFi revolution hots up

Decentralized Finance (DeFi) has gone past the stage at which it can be considered merely a disruptive new set of protocols and tools with which members of the public can attempt to unseat the banks.

It has only taken a very short time for the world of decentralized finance to become the comprehensive ecosystem of all-encompassing genius that has placed everything from trade settlement through digital payments to smart contracts into the hands of the people, and now it is the way forward to the extent that even the major financial institutions are investing in blockchain related DeFi projects.

If you can’t beat them, join them.

Now, as the legacy financial institutions and even regulators are beginning to invest their resources in not only understanding DeFi, but making it part of their everyday remit, but there are a lot of long established corporations which settle massive transactions in fiat currency which have yet to make the move.

This settlement method is fast becoming obsolete, and is dogged by long transaction settlement times, huge settlement costs levied by corresponding banks and high spread-based commissions when converting fiat currencies.

It is not just the corporate world, either. eBay, for example, recently moved away from direct payouts for all of its users via PayPal to bank transfers, which are taking in many cases up to 4 business days, which is enough time for sellers to lose out on small transactions as the value of a deal depreciates the longer it takes to receive payment.

Given this new trend for hanging onto people’s money that has come about in the e-commerce sector, blockchain-based B2B payment systems are now absolutely ripe for solving the biggest commercial payment problems of corporates which work internationally or via online means.

Coinmetro is fully licensed as a payment provider, and holds an Electronic Money Institution (EMI) license, which means that not only is it possible to conduct global settlements without the associated fees of traditional platforms, but also without the spread and foreign exchange rates or length of settlement times associated with legacy payments platforms and procedures.

Given Coinmetro’s full regulation as a cryptocurrency exchange and EMI licensed payments capability, the firm is very much a challenger bank, as well as being the go-to fiat currency on-ramp for all cryptocurrencies ranging from popular established asset classes such as Bitcoin and Ethereum, as well as new exciting and highly advanced cryptocurrencies which are now emerging, such as AllianceBlock and more recently KDA.

These days, there needs to be far more to any comprehensive DeFi venue than simply challenging banks. The whole system needs to be able to offer seamless and secure on-ramps into the crypto world and then to be able to power payments and exchange trading via regulated means, across all areas of the financial services world.

The gradual acceleration of DeFi disruption is, to some, a testament to how versatile blockchain and crypto technologies can be and perhaps it can now be considered a reality that the next stage of evolution for crypto in B2B payments will require real-world applications of these tools, yet within niche segments of the B2B payments ecosystem.

Regulation is very much on the agenda for those advocating a blockchain-based future for all areas of payments.

According to Worldpay’s Global Head of Strategy Eric Queathem who spoke recently in a specialist payments magazine much of the industry’s scrutiny revolves around an understanding of where the money is coming from and where it’s going, as well as technology’s ability to ensure security. Know Your Customer (KYC) compliance and transparency are essential to scaling up, just as they are for traditional rails, and blockchain as a transparent ledger is already positioned to deliver on these requirements.

The future is very much one in which no conductors or recipients of transactions will tolerate the huge fees and long delays imposed on them by legacy banking systems.

The embracing of regulation and clearly placing blockchain in the same league as the regulated entities in the traditional sector, regulated DeFi entities will be leading the way forward for all areas of payments and settlements.