In 1956, the first transatlantic telephone cable service opened, providing instant, continuous communication between New York and London via 36 phone lines and promising to link Old and New World voices in what would ‘swiftly become an everyday occurrence’.
Forty subsequent years of innovation culminating in the world wide web ‘flattened’ the communication system: not just bringing the connectivity enjoyed by the fortunate few hundred daily callers in 1956 to nearly every person on earth but levelling the playing field via ubiquitous, fast and cheap access.
Today, cross-border payments are being flattened by a quantum leap in financial integration and interconnectivity: the public ledger. Harnessing distributed ledger technology, public ledgers operate on open, permissionless blockchains, enabling the near-instant and continuously auditable means of recording and synchronising transactions.
Public ledgers and cross-border payments
Public ledgers allow anyone with an internet-enabled device to securely transact at speed and scale with the same technical ease in sending a payment across the globe as across the street. The traditional two-tiered financial system, by contrast, connects proprietary databases, or private ledgers, between financial institutions, relying on a network of central and correspondent banks to act as the modern-day switchboard operators. Each intermediary in the payment chain amends its own private ledger, which can add both time and costs, particularly for hard-to-reach or underbanked communities.
Public ledgers create a seamless and interoperable platform for the direct exchange of value, flattening the settlement system by bringing the efficiency, speed and cost-savings that have long been the domain solely of wholesale interbank settlement down to everyday retail use. The cross-border payments system is ripe for flattening.
In its 2024 annual survey of cross-border payments, the Financial Stability Board found that retail cross-border payments – defined as business-to-business, business-to-person and person-to-person – remain costly, slow and fragile with no segment achieving the cost and speed targets set by the G20 and several having worsened in the last year. Remittances remain particularly vulnerable to the high costs of intermediation with the global average cost of sending $200 more than double the 3% target and rising.
Reducing costs and inefficiencies
In the last two decades, digital payments increasingly sent via non-banks have emerged as a critical force in reducing some of the cross-border inefficiencies in retail payments, making gains through novel credit and netting systems designed to reduce settlement delays in banking networks. These improvements remain incremental, though, constrained by structural frictions in the wholesale settlement network as well as the sharp decline in correspondent banking relationships during the last decade.
Public ledgers supporting tokenised assets instead offer an inherent advantage: directly connecting individuals, businesses and financial institutions across borders and providing access to always-on, programmable liquidity. This enables small and medium-sized enterprises to better manage their global supply chains, reducing settlement risk and avoiding the need to preposition funds or risk stranding them.
As financial institutions and multinationals lean more heavily on tokenised assets, public ledgers will continue to find their way into everyday global payments with cross-border exchange on public networks already measuring into the trillions of dollars per year.
Today, it would be absurd to think of abandoning the phone line, which continues to carry significant volumes of internet traffic. However, revisiting the building blocks of global systems is necessary to ensure the benefits extend to all segments of society. The need for a more equitable cross-border payments system is exigent and public ledgers offer an efficient, scalable and inclusive means of connecting distant islands in the financial archipelago.
Andrew Gallucci is Senior Director for Regulatory Strategy at Circle.
This article appeared in the March 2025 edition of the DMI Journal.
OMFIF has created a working group to explore the topic of updating bank regulations to fit with public blockchains. Learn more here.
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