In recent years, the banking, financial services, and insurance (BFSI) sector has embraced digital transformation, resulting in improved efficiency, enhanced risk assessment capabilities, and a secure financial environment.
However, despite these advancements, global trade finance growth remains sluggish largely due to:
- Outdated infrastructure
- Fragmented regulatory landscapes, and
- Lack of standardisation complicates international transactions.
One notable example of progress in India is the introduction of the Unified Payments Interface (UPI), a payment platform that has transformed the country’s payment landscape and enabled seamless cross-border transactions. However, the broader global market still grapples with challenges inherent in legacy financial systems and the slow pace of adopting new technologies. These challenges are further exacerbated by the changing digital era.
To address the challenges of global trade finance, Blockchain technology has emerged as a powerful solution, promising efficient and cost-effective cross-border payments. At its core, this decentralised and distributed ledger records transactions securely across a network of computers. As blockchain technology continues to evolve, its potential to transform the global financial landscape becomes increasingly evident.
In recent years, stablecoins and asset tokenisation have emerged as promising areas with numerous successful projects such as, in 2023 alone, over $7 trillion worth of transactions were settled using stablecoins. For example,
- Broadridge’s DLT repo project has also gained traction, settling to approximately $50 billion in transactions daily.
- Blackrock’s launch of their tokenisation fund, BUIDL, and a report from Boston Consulting Firm indicate that by 2030, $16 trillion worth of illiquid assets will be tokenised.
The tokenisation of assets allows real-world assets to be represented digitally, enabling fractional ownership, broader distribution, and easier exchange on trading platforms.
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- Stablecoins, by offering a stable value against volatile currencies, reduce the financial risk for international traders and investors. Their integration into payment systems supports faster transactions and lower costs compared to traditional banking services. Also, for complex networks for cross border payments it provides a reliable and cost effective medium.
- Asset tokenisation represents real-world assets on a blockchain opens new avenues for capital in markets previously inaccessible due to high entry barriers along with other benefits like reduced cost and faster settlements and fractional ownership including facilitating the trading of illiquid assets.
The combination of stablecoins and asset tokenisation has the potential to transform global trade finance. As more financial institutions adopt this technology, the global financial ecosystem will likely become more efficient and secure, thus fostering more robust international trade relations.
At Innova, our commitment to these technologies positions us at the forefront of this transformation. Our expertise in stablecoins and asset tokenisation enables us to offer tailored solutions that cater to the dynamic needs of modern businesses and consumers. As the financial sector continues to evolve, embracing these innovations will be crucial for staying competitive and achieving sustainable growth in the international trade finance sector.
We strongly believe this is a ‘Must Do’ since it is not just an evolution but a necessary revolution in the face of an increasingly digital global economy encompassing depth and breadth of markets across the globe.
Views expressed by Shantala Sadananda, President – Banking & Financial Services and Emerging Markets, Innova Solutions
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