# International Payments: Stepping into the Digital Era
Despite the global interconnectivity fostered by advances in digital technologies, international remittance systems remain anchored in outdated networks. The prominent global standard, the Society for Worldwide Interbank Financial Telecommunication (SWIFT), typically requires one to five business days to process international transfers, with numerous intermediary fees.
On April 22, 2025, Circle, the issuer of USDC, announced the launch of the Circle Payments Network (CPN). This initiative aims to utilize stablecoins and blockchain infrastructure in settlement processes, enabling rapid and cost-effective international remittances and payments.
Circle’s unveiling of CPN coincides with the recent launch of Plasma, a blockchain network optimized for USDT transactions. As regulatory expectations suggest a new legislative framework for stablecoins in the U.S., the stablecoin market is experiencing significant expansion. Despite having similar goals, USDC and USDT appear to be diverging in their strategic approaches.
# Background: The Antiquated Remittance Network
“Ignoring technological change in a financial system based upon technology is like a mouse starving to death because someone moved their cheese” – Chris Skinner.
## SWIFT: The Standard for International Remittances
Established in 1973 in Belgium, SWIFT provides a standardized messaging system for secure international fund transfers between financial institutions. Contrary to common belief, SWIFT does not move money; it transmits payment orders securely between banks.
In the early 1970s, international transfers were predominantly conducted via Telex, a slow and error-prone text communication system over telephone lines. Recognizing its drawbacks, 239 banks from various countries founded SWIFT in Brussels, aiming to standardize international financial messaging.
Since its inception, SWIFT has expanded its network across Asia, Africa, Latin America, and beyond. Enhanced security measures and the adoption of modern messaging standards like ISO 20022 have bolstered SWIFT’s efficiency. Today, SWIFT processes over 50 million messages daily across more than 200 countries.
### The SWIFT Process
While utilizing encryption and compliance with anti-money laundering (AML) and counter-terrorism financing (CFT) regulations, a SWIFT transaction involves several steps:
1. **Initiation**: The sender requests the transfer via their bank, providing recipient bank details, including the SWIFT code.
2. **Message Transmission**: The sender’s bank sends a payment instruction to the recipient’s bank via the SWIFT network.
3. **Intermediary Involvement**: If there is no direct account link between the sending and receiving banks, intermediary banks facilitate the transfer.
4. **Receipt and Deposit**: The recipient’s bank receives the message and credits the recipient’s account.
This process often takes one to five business days and incurs significant costs compared to domestic transfers due to intermediary fees and potential currency conversion charges.
## Alternative Remittance Networks
Apart from SWIFT, other global remittance systems exist. Notable examples include:
– **CIPS (Cross-Border Interbank Payment System)**: Developed by the People’s Bank of China, CIPS supports RMB-based remittances, aiming to expand RMB usage, particularly in Asia.
– **SPFS (System for Transfer of Financial Messages)**: Created by the Central Bank of Russia, SPFS serves financial institutions within and outside Russia affected by SWIFT sanctions.
– **ACUMER**: Iran’s alternative to circumvent U.S. sanctions, offering a SWIFT substitute for international payments.
These networks often offer lower fees and faster transactions but have limited reach and interoperability compared to SWIFT.
# The Necessity for Digital-Native Remittance Systems
Despite the global integration in other sectors facilitated by digital advancements, financial systems largely depend on antiquated technology. This disparity emerges not from a lack of technology but from the intrinsic communal trust required for money’s value, traditionally upheld by banks, institutions, and governments.
Blockchain technology, developed for digital-era finance, presents an opportunity to revolutionize global payment infrastructures. With a foundation based on decentralized servers and intrinsic trustless operations, blockchain is primed for global financial transactions.
# CPN: Revolutionizing Global Payment Networks
“By orchestrating stablecoin payments, Circle Payments Network enables payment providers to unlock new markets and new business models faster than ever before.” – Nikhil Chandhok.
## Circle Payments Network (CPN) Overview
On April 22, 2025, Circle launched CPN, a blockchain and stablecoin-based global remittance standard. CPN includes participation from global banks, payment service providers, and digital asset-centric financial institutions.
CPN represents the first attempt to merge regulated stablecoins with governance layers for traditional financial institutions, connecting standard payment systems with stablecoins to offer a credible settlement layer. This enables real-time cross-currency, cross-time-zone payments on a secure, 24/7 blockchain.
Although CPN does not transfer money directly like SWIFT, it acts as a marketplace for financial institutions, leveraging USDC and EURC stablecoins along with public blockchains.
### Key CPN Participants
1. **Governing Body**: Circle enforces CPN regulations, develops core infrastructure, registers third-party modules, maintains network security, ensures compliance, and coordinates settlement.
2. **Participating Financial Institutions (PFIs)**: These include banks, PSPs, and digital banks, capable of acting as Originating Financial Institutions (OFIs) or Beneficiary Financial Institutions (BFIs).
3. **End Users**: Individuals using PFI services for remittances, unaware of CPN’s involvement.
4. **Service Providers**: Entities offering technological or financial services like exchange, market making, stablecoin issuance, risk management, wallet infrastructure, compliance monitoring.
### CPN Operations
CPN processes involve multiple steps:
1. **Initiation**: The sender requests a transfer via an OFI.
2. **Quotation**: OFI solicits exchange rates and fees via CPN.
3. **Quotation Return**: CPN retrieves and returns quotations from BFIs.
4. **Confirmation**: The sender confirms details with OFI.
5. **Transaction Request**: OFI sends transaction details to CPN, which then reaches BFI for compliance checks.
6. **Finalization**: OFI approves and signs the transaction packet, which CPN broadcasts to the blockchain.
7. **Completion**: Upon BFI receiving funds, it completes the transfer, notifying CPN, and subsequently, OFI of the completion.
CPN uses a hybrid architecture, intending to transition to fully on-chain operations for enhanced efficiency and security.
## Implications for the Future
The broader adoption of CPN could significantly disrupt global remittance and payment markets. Streamlined, low-cost international transactions would benefit corporations with global supply chains, reducing financing costs from delayed payments. For individual users, affordable international transactions could simplify travel expenses and online platform payments. Fintech developers might innovate new services on the CPN infrastructure.
# A New Dawn in the Stablecoin Arena?
The timing of Circle’s CPN launch closely follows the release of Plasma, a blockchain tailored for USDT transactions with fee-free transfers. Despite similarities, USDC and USDT show diverging paths. USDC adheres to stringent U.S. regulations, while USDT expands in regulatory grey areas, leading to varied revenue strategies and treasury operations.
As the U.S. regulatory framework for stablecoins materializes, the market’s rapid growth will test the strategic choices of these two giants. Observers will keenly watch how they shape the future of the digital economy.
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(Note: A detailed annexure describing CPN processes, rules, and technical specifications can significantly enhance the reader’s technical understanding and application of CPN, fostering industry-wide comprehension and operational readiness.)
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