Enterprise blockchain: digital payment rails on track

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Industrial adoption of blockchain is gaining ground in areas such as supply chain management. But what about elsewhere? How comfortable are business leaders in switching from traditional banking networks to using blockchain (or hashgraph) enabled financial services? That’s the question. Global fintech companies, such as Circle, believe that digital currency is breaking into the mainstream. And firms are working hard to build payments infrastructure capable of moving funds at ‘internet speed’, expanding the range of promising enterprise blockchain applications.

We live in a digital world. But, in many cases, money still travels on legacy payment rails – attracting high transaction fees and only moving during business hours. And for large enterprises with global operations and hundreds of suppliers and contractors to pay, this is a headache. But perhaps not for long. “Blockchain and digital assets have the capability to solve these issues,” Kash Razzaghi, Chief Business Officer at Circle, told TechHQ.

Raising awareness of enterprise blockchain solutions

Razzaghi, who will be attending Paris Blockchain Week in March 2023, is keen to raise awareness of enterprise blockchain technology and show companies that alternative payment solutions are now coming online. “We’re getting to the point where the promise of transmissivity with low cost is coming to fruition,” he explains.

Research conducted by Uniswap Labs and Circle, available on the SSRN pre-print repository, highlights some of the cost savings that could be up for grabs. The team’s analysis takes a broad look and notes that even sending smaller amounts of currency via on-chain foreign exchange and digital cross-border payments could reduce fees by as much as 80%.

Enterprises have much to gain as digital ledgers drive down costs, but they aren’t the only beneficiaries. Circle launched its USD Coin (USDC) – a so-called stable coin, where every 1 USDC issued is backed with 1 US Dollar held in reserve – in 2018. And the firm has worked with a number of partners to expand operations. In 2022, the global fintech company teamed up with Stripe to expand payment options for content creators on Twitter.

There are many examples of how novel digital payment rails, including enterprise blockchain applications, could lead to innovation in the financial sector. Multinational firms, who need to move money internally, don’t want to be constrained by banking hours. And enterprise blockchain solutions featuring digital ledgers, could pave the way for more efficient transfer and tracking of funds.

Payroll in cryptocurrency?

The capacity for enterprises to send and receive money in seconds rather than days or weeks opens up a range of options. Today, employees are typically paid monthly. But weekly, daily, or even hourly payments become possible when the movement of money is baked into code. Deel, a hiring and payments firm that focuses on streamlining the process of working with international employees and contractors, provides a service that allows companies to fund payroll in USDC.

There are plenty of fintech achievements to celebrate. However, it is fair to say that cryptocurrency has been on somewhat of a roller coaster ride. And business leaders may be cautious about signing up for enterprise blockchain solutions. But problems such as the threat of bad actors are not isolated to the rise of decentralized finance (DeFi). “People need to trust it and understand it,” said Razzaghi. “There are still things that need to be solved.”

Work needs to be done on making fiat on-ramps (mechanisms that allow users to convert their regular government-issued currency, such as US Dollars, Euros, or British Pounds, into tokens) seamless to attract a broader user base. As analysts have noted, DeFi platforms can have a steep learning curve and be difficult for non-technical users to navigate.

There are also regulatory uncertainties. But Circle has a large policy team and is active in keeping governments and regulatory bodies updated. USDC attestation reports, carried out by Grant Thornton – a firm providing assurance, tax and advisory services – are issued monthly and freely available to download.

Users wanting to understand more about what to consider when building enterprise blockchain applications may also benefit from developer resources. Circle, and other providers, have comprehensive guides for getting started, including compliance considerations. For example, ERC-20 tokens must observe the travel rule on-chain, which mandates that fund transfers of USD 3,000 or more (or equivalent in cryptocurrency) require transmission of know your customer (KYC) details to the beneficiary institution.

Enterprise blockchain testing and development

Developer resources are also helpful in understanding security threats and mitigating those risks. Circle’s guide has a detailed section on blockchain confirmations (as well as covering many other topics), which includes associated reorganizations that take place when transactions in a blockchain are packaged into blocks. In this case, operators can protect themselves from bad actors attempting to manipulate the system to have their cryptocurrency returned (but keeping the goods) by waiting for a number of blocks before recognizing the transfer.

Returning to Razzaghi’s comment that people need to understand the principles that underpin enterprise blockchain and other DeFi solutions, it’s worth drawing attention to the availability of application programming interface (API) sandboxes. These tools allow users to explore the possibilities of fully programmable API’s for facilitating payments and enabling other account experiences safely – in an isolated and controlled environment. For example, developers can run requests and simulate responses to test that their implementations behave as expected – and are sufficiently robust – before deploying in a production environment.