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EU Forges Ahead With Instant Crypto Payment Rails as US Struggles After Silvergate

source-logo  beincrypto.com 11 May 2023 14:37, UTC

Businesses can use special virtual accounts to make crypto-to-fiat payments across Europe.

Nilos is offering crypto payment accounts through a partnership with card issuer Modulr.

Crypto Payment Rails Live on Despite Silvergate Collapse

A business can originate and settle a crypto payment in seven seconds using a special crypto-friendly payment account. A special account converts the user’s crypto into fiat before transmission.

The backbone of Nilos is the Single Euro Payments Area (SEPA) and the Faster Payment rails. Nilos’ settlement speed complies with SEPA requirements for transactions between EU and certain non-EU member countries to clear within 10 seconds.

SEPA Countries | Source: European Central Bank

Modulr enables those holding wallets from electronic monetary institution Nebeus to send fiat converted from crypto to special IBAN accounts in Europe.

The payments infrastructure provider also enables Zumo users to fund their crypto wallets through direct settlement from their bank accounts. Zumo is a wallet service provider based in Edinburgh, U.K.

Crypto firms in the U.S. had to explore alternative rails to convert between crypto and fiat after Silvergate Bank and Signature Bank collapses. Silvergate enabled its customers to exchange crypto for fiat through the Silvergate Exchange Network.

After Silvergate filed for voluntary liquidation, other banks with similar payment networks welcomed crypto customers. USDC issuer Circle used Cross River Financial’s 24/7 crypto-to-fiat Real-Time Payments System for stablecoin settlements.

Another user of Cross River’s infrastructure is Coinbase, the largest crypto exchange in the U.S.

Could Banks Win the Imminent Real-Time Settlement War?

Restrictions associated with the COVID-19 pandemic accelerated developments around instant payments.

The Bank of England tested a new real-time system that synchronized the flow of assets in two separate ledgers. The pilot foreshadows a new Real-Time Gross Settlement system enabling fast interbank transfers going live next year.

In July, the U.S. Federal Reserve (Fed) will trial instant interbank transfers through its FedLine network. These systems enable transacting parties to manage cash flow, among other things.

Both stand to lay the groundwork for a central bank digital currency that could dent the value proposition of fast P2P crypto payment networks like Lightning.

Bitcoin’s Lightning Network allows cheap and fast payments between nodes across a channel. Transactions do not need to tolerate long waiting times typically associated with payments on the base Bitcoin network.

Another benefit of the Lightning Network is its ability to enable micropayments. This means users can send and receive minimal amounts of Bitcoin. This was previously impossible due to the high fees associated with on-chain transactions.

With the Lightning Network, users can send and receive payments as small as a few satoshis, making it possible to pay for things like articles, videos, and other digital content with Bitcoin.

And transaction throughput on Lightning is higher than Visa and Mastercard at one million transactions per second.

Its speed is offset by the challenge of securing Bitcoin in a Lightning wallet for locking into a payment channel. Users may consider opening a bank account at a FedNow institution as safer and easier than funding a Lightning wallet.