BLOCKCHAIN-BASED CROSS-BORDER PAYMENT SYSTEMS: EFFICIENCY AND REGULATORY CHALLENGES

Abstract

Cross-border payment systems represent critical infrastructure for global commerce, yet traditional correspondent banking networks suffer from significant inefficiencies including high costs, slow settlement times, and limited transparency. Blockchain technology has emerged as a promising alternative, offering near-instantaneous settlement, reduced transaction costs, and enhanced traceability. This research examines the efficiency gains and regulatory challenges associated with blockchain-based cross-border payment systems through comparative analysis of traditional SWIFT-based transfers and blockchain implementations including Ripple, Stellar, and central bank digital currency initiatives. We evaluate transaction speed, cost efficiency, scalability, and regulatory compliance across these platforms using empirical data from financial institutions and blockchain networks. The findings reveal that blockchain systems reduce average settlement times from 3-5 days to under 5 seconds while cutting transaction costs by approximately 40-60% compared to traditional correspondent banking. However, significant regulatory challenges persist, including anti-money laundering compliance, jurisdictional ambiguity, capital control enforcement, and consumer protection frameworks that were designed for centralized financial systems. Through analysis of regulatory approaches in major financial centers including the United States, European Union, and Singapore, we identify emerging frameworks attempting to balance innovation with risk mitigation. The research demonstrates that while blockchain technology offers substantial efficiency improvements for cross-border payments, widespread adoption requires coordinated international regulatory standards, interoperability protocols, and robust governance mechanisms that address financial stability concerns without stifling innovation. This work contributes practical insights for policymakers, financial institutions, and technology providers navigating the transformation of international payment infrastructure.