Sara Drakeley

Let’s cut to the chase — the intricate world of international payments is a complete mess. With lengthy processing times, high transaction fees and unpredictable exchange rates, challenges abound for individuals and businesses.&nbsp;



These hurdles in the traditional financial system harshly impacted me and my family during a critical time of need. In 2020, after the destruction caused by Typhoon Goni, the urgency of sending money to my family living in the Philippines became a stark reality.&nbsp;



And the traditional method that I had to resort to took days; each moment of delay carried potentially dangerous consequences. What made the situation worse was the fee attached to the transaction. Instead of the whole sum going towards helping the village purchase essential resources and supplies, $40 went into the pockets of the processor.



Then, to pick up the payment, my family had to navigate flood-damaged terrain, fearing robbery due to the sizable amount of fiat they were now carrying. In a digital age, the technology for secure transactions eluded them. Ironic, isn’t it?



After COVID-19, our world is undeniably more globally connected than it has ever been, and we are seeing a surge in cross-border transactions for goods, services, remittance support and the gig economy. We need a payment infrastructure that supports these growing needs. Blockchain technology became the forerunner solution to revolutionize these payments, reducing inefficiencies, offering settlements in real-time and lowering transaction costs.



After digging into the technology, I was determined to help its development. Creating a simple solution that would have helped my family during a personal crisis became my passion: leveraging cryptographic technology to solve real-world problems for real people.&nbsp;



The elephant in the room, however, is the glaring lack of privacy in both traditional systems and blockchains.&nbsp;



<h2 class="wp-block-heading">The fire we’re playing with</h2>



Despite the potential of the technology to transform this field, we have yet to find a method of value transfer that achieves the delicate balance between transparency for compliance and privacy for individual protection.



For businesses, the public nature exposes strategies, negotiations and potentially sensitive financial information to competitors and the broader public. For individuals, it can be downright dangerous.



Most existing &#8220;trustless&#8221; blockchain solutions sacrifice privacy entirely, raising concerns about the implications of successful blockchain payments where anyone can scrutinize the amounts and timing of transactions.



This means that if you pay a freelancer in USDC, you can see how much they make for any other job, or if you buy a coffee with bitcoin, that interaction with a public blockchain means your real-time location is broadcasted not just to your friends, but to anyone anywhere in the world.



On the other hand, transparency in financial systems can be a good thing. It helps dissuade bad actors from activities like ransoms or funding criminal endeavors. We don’t want financial ecosystems that make it easy to hide malicious activity.



While blockchains offer streamlined solutions for use cases like remittances, the exposure of transaction details introduces risks to the senders and recipients, posing threats in both cyber and physical realms.&nbsp;



<h2 class="wp-block-heading">Your digital human rights</h2>



As technology progresses, there’s an overwhelming focus on safety measures like anti-terrorist financing protections. While this work is absolutely critical, we’ve overlooked in this pursuit a fundamental digital life principle: Privacy is a human right, not a “human option.” It protects people from unwarranted interference, identity theft and even one’s own physical safety.&nbsp;



Read more from our opinion section: <a href="https://blockworks.co/news/old-money-doesnt-ruin-the-cypherpunk-dream">Old money doesn’t ruin the cypherpunk dream</a>



Technology itself exists to prevent bad actors while providing privacy to everyday people. It’s a false dichotomy to assume “privacy” is a dirty word. A wise man said, “<a href="https://moxie.org/2013/06/12/we-should-all-have-something-to-hide.html">we should all have something to hide</a>.” A world without privacy is a world without progress.&nbsp;



Financial transactions, regardless of their origin or method, should be private from prying eyes as long as they are compliant. Many blockchain technologies were designed with transparency in mind, which presents significant challenges. While blockchain is key to secure financial transactions, it must evolve to protect users’ privacy effectively.&nbsp;



<h2 class="wp-block-heading">The roadmap to international financial privacy</h2>



So, what’s next? We need to progress with the global economy, not against it. Payment systems must evolve with global economic trends — a harmonious blend of innovation and regulation, where privacy and efficiency coexist.&nbsp;



With every harmony, there are checks and balances. Compliance plays a significant role in balancing a customer’s right to privacy and adhering to regulatory requirements. Innovative technologies coming into existence that check both boxes — protecting against potentially malicious transactions along with customers’ personal information and identities — are necessary to solve the problem.&nbsp;



As the world becomes more interconnected, the demand for privacy increases. And if we want blockchain to succeed in cross-border payments, we have to adopt a framework that not only meets today’s demands, but is also prepared for tomorrow’s challenges. You shouldn&#8217;t have to choose between speed and security, low cost and privacy.



<hr class="wp-block-separator has-alpha-channel-opacity"/>


<div class="wp-block-post-author-biography">Sara Drakeley is the CEO of Sentz, a cryptocurrency company that she joined as the third engineering hire in August 2018. With a diverse background spanning animation, finance, and aerospace, Sara found her passion in the booming world of cryptocurrency in the boom of 2017. Her expertise in procedural geometry and her desire to impact people&#8217;s lives led her to Sentz, where she played a key role in implementing SGX attestation procedures, contributing to consensus protocol development, building the company’s initial infrastructure, and the development of MobileCoin Fog, enabling secure mobile transactions without exposing private keys. 

Previously, as Sentz’s CTO, she led the company’s research branch, exploring smart contracts, zero-knowledge proofs, and ways to enhance the protocol. Prior to joining the company, Sara worked for household names such as SpaceX, Engineer Gate, Walt Disney Animation Studios, and was a researcher at MIT Media Lab. She holds a dual degree from Massachusetts Institute of Technology in Mathematics with Computer Science and Comparative Media Studies. Sara is based in San Francisco, California.</div>


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cryptocurrency

International payments are a complete mess

Markus Franke

Stablecoins have emerged as a pivotal instrument in the dynamic world of crypto, providing (relative) stability in an otherwise volatile market. Real-world use cases powered by Web3 technology evolve around the tokenization of real assets and the easy, permissionless and borderless transfer of assets. Stablecoins take center stage in these transfers and have gained prominence as a store of value and a medium of exchange.&nbsp;&nbsp;



Looking ahead to 2024, several trends are poised to shape the trajectory of stablecoins.



<h2 class="wp-block-heading">Demand for stablecoins will increase</h2>



In the past two years, the global stablecoins market has grown to over $100 billion in market cap, mostly driven by applications around DeFi, trading and liquidity management. So far, the demand for stablecoins has not been driven so much by advancements in mobile payments, remittances or settlements.&nbsp;



As the cryptocurrency market continues to mature, end-users and businesses alike are recognizing the importance of the combination of stability, security and speed in financial transactions that stablecoins can offer.&nbsp;



We have seen significant development in the regulatory environment, e.g. with the upcoming Markets in Crypto-Assets Regulation (MiCA) in Europe, or a framework for stablecoins in Singapore. Better infrastructure around custody, identity (account abstraction) and access (costs for on and off-ramping) increases usability of stablecoins. Improvements in infrastructure and regulatory clarity will allow and encourage more institutional actors to enter the market and enable end-user focused applications in the next year.



<h2 class="wp-block-heading">Low volatility assets will be a trend</h2>



One of the shifts we anticipate in 2024 is the rising popularity of low-volatility assets within the stablecoin space.&nbsp;



Market participants are becoming more discerning, seeking stability not only with regards to the value against one fiat currency, but also becoming increasingly aware of the need for reduced risk exposure to, for example, a basket of currencies or goods as an inflation hedge. Stablecoins can not only track the value of one fiat currency, but are able to track a basket of currencies.&nbsp;



With that in mind, stablecoins can be a great settlement instrument for multinational organizations that have a need for efficient cross-border settlement transactions. The choice of the settlement currency for global trade has significant implications, including exchange rate stability, liquidity, transaction costs and political considerations. Examples include the settlement of roaming charges between carriers, interconnection charges between network operators, delivery cost settlements for postal operators or the settlement of freight and transportation costs in logistics networks. A multi-currency low-volatility asset can address these complexities. Low-volatility assets are also able to track a basket of goods in a certain country or community and therefore, can be a good hedge against inflation.&nbsp;&nbsp;



<h2 class="wp-block-heading">Overcollateralization, transparency and diversification of stablecoin collateral will be key</h2>



For a sustainable use of digital assets, users need to know that the collateral of the assets is sustainable. Regulation of stablecoins is going in that direction as well; for example, MiCA differentiates between fully transparent and decentralized platforms and credit backed, permissioned projects.&nbsp;



Stablecoin collateral needs to be transparent in terms of the assets that are actually used to collateralize the stablecoins, but also in terms of the counterparties involved. Overcollateralization, transparency and diversification of collateral are set to become key pillars of stablecoin frameworks. Every asset used as collateral is prone to certain risks: By overcollateralizing and diversifying assets, projects aim to mitigate the risk of a single-point of failure, ensuring the stability and resilience of stablecoin ecosystems.



<h2 class="wp-block-heading">Dollar-based stablecoins will remain very important</h2>



The dominance of dollar-based stablecoins will persist in 2024. The global influence of the US dollar in FX markets and the high interest environment will support this development. Users in countries experiencing high price inflation and devaluation of their local currencies have a preference to access US dollars or other stable currencies like the Euro. Despite the emergence of other digital currencies, (e.g. the cEUR, cREAL or the eXOF), USDC and USDT alone have a combined market cap greater than $100 million and are dominating the global stablecoin market.&nbsp;



<h2 class="wp-block-heading">Local currencies will be the trend</h2>



Looking towards 2024, I predict a shift towards the emergence of local digital currencies. As the cryptocurrency space continues to integrate with traditional financial systems, the demand for stablecoins tied to local fiat currencies is expected to rise.&nbsp;



Read more from our opinion section: <a href="https://blockworks.co/news/interoperability-buzzword-blockchains">Interoperability isn’t just a buzzword</a>



Users need to pay local merchants, taxes or input factors in local currencies. In cases where users have to borrow money to build a business and need a loan to get started, the user will have first revenues for that business in local currency. In order to pay back this loan, a loan in foreign currency would be more expensive if the local currency devalued. Therefore, the user has a preference for a loan in their local currency. Local currency stablecoins can potentially bridge the gap between traditional and digital finance, fostering greater acceptance and adoption.



<h2 class="wp-block-heading">Conclusion</h2>



The future of stablecoins in 2024 is marked by a confluence of factors that reflect the maturation of the digital asset ecosystem. The predicted increase in demand, the trend towards low-volatility assets, the emphasis on overcollateralization and transparency, the enduring importance of dollar-backed stablecoins and the rise of local currency stablecoins collectively paint a picture of an evolving landscape.&nbsp;



<hr class="wp-block-separator has-alpha-channel-opacity"/>


<div class="wp-block-post-author-biography">Dr. Markus Franke is an economist who has been working at the intersection of economics and technology in TradFi (J.P.Morgan, Merrill Lynch, Allianz), as a post-doc researcher (including the Ludwig-Maximilians-Universität München, Columbia Business School in New York and Hong Kong University of Science and Technology), and in Web3 (on Celo, as a board member of cLabs, founder of Mento Labs, and advisor of many projects in the EVM space). </div>


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payment

2024 will be the year for stablecoins

Bessie Liu

<div id="highlights-block_62d1da8f239aa" class="highlights">
 <ul>
 <li>Previous cryptocurrency regulation was “not enough,” according to Russian legislators</li>
 <li>The amended law will prevent workarounds of existing crypto payment restrictions</li>
 </ul>
 
</div>



Russian President Vladimir Putin signed a bill on Thursday amending the country’s existing ban on cryptocurrency payments to specify additional types of tokens.



The amendment — submitted by ​​Anatoly Aksakov, a member of the Russian State Duma, on June 7 — will prohibit the use of any security tokens, utility tokens and non-fungible tokens (NFTs) as forms of payment for goods and services in the country.



According to Russian media group RBC, group legislators decided that the existing ban — which has been active since January 2021 — was not enough, as it only prevented individuals and entities from using “payment tokens.”&nbsp;



The amended law aims to prevent workarounds of existing crypto payment restrictions.



Following strict sanctions imposed on Russia following its invasion of Ukraine, <a href="https://www.reuters.com/article/ukraine-crisis-russia-cryptocurrency/russias-central-bank-sees-space-for-crypto-in-international-trade-idUSR4N2X3018" target="_blank" rel="noreferrer noopener">Reuters reported</a> in May that Russia’s central bank had plans to allow the use of cryptocurrencies for international payments within the context of global trade.&nbsp;



Major exchanges have complied with US sanctions, freezing accounts of sanctioned users. Most recently, Binance <a href="https://cms.blockworks.co/binance-blocks-newly-sanctioned-russians-launches-card-for-ukrainian-refugees/" target="_blank" rel="noreferrer noopener">closed the accounts</a> of a handful of individuals with family ties to top Russian officials.



Russia is also working on system improvements to identify participants of blockchain transactions, <a href="https://www.reuters.com/technology/russia-improve-crypto-transaction-monitoring-regulation-draws-closer-2022-07-08/" target="_blank" rel="noreferrer noopener">according to Reuters</a>. Blockchains such as Bitcoin record transactions on a transparent, immutable ledger, but the individual identities of wallet holders are pseudonymous, making it difficult to monitor.&nbsp;



While Moscow has been open to regulating digital assets, the Bank of Russia has previously floated a total ban on trading and mining, citing financial stability concerns. The central bank <a href="https://www.reuters.com/article/ukraine-crisis-russia-cryptocurrency/russias-central-bank-sees-space-for-crypto-in-international-trade-idUSR4N2X3018" target="_blank" rel="noreferrer noopener">reportedly</a> claimed in May that crypto’s threat to the country’s finances had decreased, as Russian banks had enough foreign currency moving forward.



In any case, Putin’s new amendment suggests there are no plans for the country to relax its digital currency regulations — at least for now.



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