The SAP has announced the launch of an experimental Digital Currency Hub that will enable businesses to conduct testing for cross-border payments using stablecoins based on blockchain technology. Currently, users have the opportunity to experiment with the use of Circle’s USDC and EUROC stablecoins to settle international invoices on a trial blockchain network using simulated funds.
It is widely recognized that international payments are slow, unreliable, and costly. In contrast, stablecoin payments offer prompt finality within minutes and can be highly cost-effective when conducted on a network with minimal gas fees.
SAP identifies two major obstacles hindering the adoption of blockchain-based payment systems by businesses. The first challenge is the inherent volatility of cryptocurrencies, which can be addressed through the use of stablecoins. The second challenge is the lack of integration with accounting systems. We argue that there is a third challenge to overcome, which involves the ability and willingness of payment recipients to accept stablecoins.
In the traditional approach, invoice payments are tracked by the accounts department through bank or credit card statements. The use of blockchain technology complicates this process. SAP’s Digital Currency Hub facilitates the tracking of payments in a conventional manner by integrating the blockchain ledger with the accounting system.
Central banks have introduced central bank digital currencies (CBDCs) in response to concerns about stablecoins. The European Central Bank, for example, has expressed reluctance to endorse stablecoins backed by central bank money due to potential risks. The temporary instability in the parity of USDC when Silicon Valley Bank faced financial challenges serves as an example.
The efficiency benefits of blockchain-based payments pose a potential threat to the profitable corporate finance sector. Institutions are exploring deposit tokens as an alternative while the development of CBDCs progresses. JP Morgan has introduced JPM Coin, which functions as a blockchain-based bank account. German institutions are also investigating deposit tokens. The emergence of SAP’s Digital Currency Hub may indicate the need for accelerated progress in this area.
