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Financiers DB, Santander, and StanChart provide guidance to Circle for the creation of a new stablecoin-based Payments Network.

Circle, the organization behind USDC and EURC stablecoins, reveals Circle Payments Network, aiming to eliminate barriers in cross-border payments for mainstream transactions.

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Major financial entities, including DB, Santander, and StanChart, offer advice to Circle on...
Major financial entities, including DB, Santander, and StanChart, offer advice to Circle on developing a new stablecoin-based payments network.

Financiers DB, Santander, and StanChart provide guidance to Circle for the creation of a new stablecoin-based Payments Network.

Circle, a leading stablecoin issuer, has unveiled its latest venture, the Circle Payments Network (CPN), designed to revolutionize cross-border payments using regulated stablecoins like USDC and EURC. The network aims to provide a robust, compliant backbone for global payments, significantly impacting the stablecoin market's scale, regulatory landscape, and integration with mainstream finance.

The CPN creates a programmable payments infrastructure that supports various use cases, including invoice payments, remittances, treasury services, and payroll. By enabling instant, 24/7 settlement of transactions, the network aims to overcome delays and inefficiencies of traditional cross-border banking systems.

Key features and implementation details include:

  1. Single Network Settlement: Financial institutions and payment providers can connect to a single network for predictable settlement times and compliance control, avoiding fragmentation from multiple stablecoin liquidity pools.
  2. Integration of Circle Mint and APIs: Clients can fund transactions in USDC and facilitate payouts in local currencies in over 80 countries. For instance, Corpay's partnership with Circle embeds USDC in its cross-border payments.
  3. Compliance and Regulatory Standards: The network is designed to comply with global regulatory standards by integrating membership in compliance networks such as the Global Travel Rule network (GTR) and TRUST, ensuring jurisdiction-agnostic and secure digital asset transfers among regulated entities.
  4. Cross-Chain Liquidity: Circle Gateway (testnet) offers instant cross-chain liquidity and unified USDC balances across blockchains, optimizing liquidity management for institutions using CPN.

The emergence of a unified network like CPN might foster healthy competition with other blockchain-based payment protocols, influencing future stablecoin and crypto payment utility debates. Potential implications for the stablecoin market include:

  1. Default Settlement Layer for Global Commerce: Establishing USDC as a default settlement layer for global commerce could potentially rival existing payment networks like Visa and Mastercard in the cross-border payment space.
  2. Increased Adoption of Stablecoins: Increased adoption and usage of stablecoins in regulated financial environments could drive stablecoin transaction volumes dramatically.
  3. Broader Institutional Adoption: The programmable, compliant nature of CPN may encourage broader institutional adoption of stablecoins, effectively reducing dependence on traditional banking networks and enhancing payment efficiency.
  4. Strengthened Legitimacy and Regulatory Acceptance: Cooperation with multiple regulated financial institutions and integration with compliance frameworks could strengthen stablecoins' legitimacy and regulatory acceptance worldwide.

Nikhil Chandhok, Chief Product and Technology Officer at Circle, stated that the Circle Payments Network's programmable infrastructure makes it possible to embed value transfer into modern financial applications in ways that weren't feasible before.

The business model of the Circle Payments Network involves three sets of fees: payout fees for financial institutions in the recipient country, FX spreads, and a network fee (a variable basis-point charge, tiered by country group) charged by Circle.

In the same space, a new competitor, Ubyx, is eyeing the market. Ubyx is willing to work with a variety of stablecoins, potentially leveling the playing field for smaller stablecoins and preventing an oligopoly of stablecoins.

Circle is collaborating with several banks, including Deutsche Bank, Santander, Societe Generale, and Standard Chartered, and 28 payment firms. However, many partner startups are currently creating their own on and off-ramps, leading to significant duplication of effort. Circle will govern and set standards for the network.

Circle has filed for an IPO at the start of this month, but the timing remains uncertain due to stock market volatility following recent sanctions announcements. If a payment is made from the United States to the Philippines, the sender onboards onto USDC, and the originating financial institution requests quotes across the CPN. Financial institutions in the recipient country respond, and the originator confirms the best quote, allowing the stablecoin transaction to proceed.

[1] Circle. (2023). Circle Payments Network Whitepaper. Retrieved from https://circle.com/en/payments-network-whitepaper [2] Corpay. (2023). Corpay Partners with Circle to Embed USDC in Cross-Border Payments. Retrieved from https://corpay.com/news/corpay-partners-with-circle-to-embed-usdc-in-cross-border-payments [3] Circle. (2023). Circle IPO Filing. Retrieved from https://www.sec.gov/Archives/edgar/data/1602042/000119312523080767/d400716d425_circle-20230303.htm [4] Circle. (2023). Circle Payments Network Launch. Retrieved from https://circle.com/en/payments-network-launch [5] Circle. (2023). Circle Compliance Frameworks. Retrieved from https://circle.com/en/compliance-frameworks

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