Bridging Borders: How Onchain FX Tackles the Cross-Border Payment Challenge

Cross-border payments remain one of the biggest inefficiencies in global finance. Despite technological advances in domestic payment systems, sending money internationally continues to be slow, expensive, and opaque. Each year, over $150 trillion moves across borders, yet the infrastructure handling these flows is built on decades-old systems designed for an era before digital connectivity.

Mento is pushing a solution through onchain foreign exchange (FX) leveraging onchain solutions to address the fundamental problems plaguing international payments. By building infrastructure for onchain FX liquidity, both for local and global currencies, Mento is tackling a $7.5 trillion daily market ripe for the taking.

The Cross-Border Payment Problem

The friction in today's cross-border payment system affects everyone from multinational corporations to migrant workers sending money home:

High costs: The global average cost for remittances is 6.3% of the amount sent, with some corridors exceeding 13-14%.

Slow settlement: Typical transfer times range from 2-5 business days, with delays common during weekends or holidays.

Poor transparency: Hidden fees, unfavorable exchange rates, and uncertain arrival times create frustration and financial hardship.

Limited accessibility: Many underserved markets lack efficient payment rails, particularly for non-USD currencies.

For the 800+ million people worldwide who depend on remittances, these inefficiencies translate to approximately $30 billion in unnecessary fees annually.

Why Traditional Systems Fall Short

The root problem lies in the correspondent banking model that dominates cross-border payments. When someone sends money internationally, their transaction must travel through a complex chain:

1. The sender's bank initiates the transfer.

2. A correspondent bank with international reach receives the instruction.

3. The SWIFT messaging network carries the payment details.

4. Multiple intermediaries process the transaction across different time zones.

5. Finally, the recipient's bank credits the funds.

This fragmented process creates several critical issues:

Settlement risk: Known as "Herstatt risk" after the 1974 banking collapse, this occurs when one party fulfills their obligation while the counterparty fails to deliver.

Capital inadequacy: Banks must maintain nostro/vostro accounts with pre-funded capital in multiple currencies across correspondent relationships. This ties up billions in liquidity that could be deployed elsewhere.

Limited hours: Traditional banking systems only operate during business hours in their respective time zones. This creates artificial delays when payments cross time zones or occur during weekends.

Multiple points of failure: Each intermediary represents a potential point of failure, adding cost, complexity, and risk to the process.

Mento's Unique Approach: Multi-Currency Liquidity

While the majority of stablecoin projects focus on USD-based stablecoins, Mento identified a specific market gap: the need for liquidity in non-USD currencies, particularly for emerging markets. Mento unifies fragmented FX liquidity across chains, enabling professional traders and institutions with effective, secure, and future-focused trading, beyond just USD.

This approach directly addresses the limitations of current cross-border payment solutions:

Beyond USD dominance: While USD stablecoins comprise over 93% of the market, many payment corridors involve non-USD currencies. Mento's focus on multi-currency liquidity addresses this gap.

Cross-chain compatibility: Rather than being limited to a single blockchain, Mento aims to connect liquidity across multiple chains, creating a more robust network effect.

Focus on emerging markets: Many of the most expensive remittance corridors involve emerging market currencies. Mento's emphasis on these markets targets some of the most acute payment needs globally.

For countries like Lebanon, El Salvador, and Honduras, where remittances represent over 20% of GDP, more efficient payment rails could have significant economic impact.

Real-World Implementation Progress

Early evidence suggests onchain FX can deliver on its promise of more efficient cross-border payments:

Price consistency: Data from EUROC/USDC pairs shows onchain exchange rates tracking within a few basis points of traditional FX markets, indicating efficient price discovery.

Stable liquidity: Unlike traditional markets where liquidity can vanish during off-hours, onchain FX pools show consistent depth throughout the day and week.

Low transaction costs: Blockchain-based exchange fees typically range from 0.01% to 0.05% – far lower than traditional FX spreads and fees.

These metrics suggest that onchain FX is not merely theoretical but already demonstrating practical advantages over traditional systems.

The Remaining Challenges

Despite its promise, several challenges must be addressed for onchain FX to reach mainstream adoption in cross-border payments:

1. On/Off-Ramp Infrastructure

The ability to efficiently move between traditional currency and stablecoins remains a friction point. Current on-ramp costs range from 0-1% at centralized exchanges to higher fees at standalone services.

For onchain FX to reach its full potential, more efficient, widely available on/off-ramps are needed, particularly in underserved markets.

2. Regulatory Frameworks

Cross-border payments are highly regulated, with anti-money laundering (AML) and know-your-customer (KYC) requirements varying by jurisdiction. Innovative solutions that satisfy regulatory requirements while preserving the efficiency of blockchain technology are essential.

Decentralized identity solutions that verify users without compromising privacy represent a promising approach to this challenge.

3. User Experience Improvements

Current blockchain interfaces remain too technical for mainstream users. Simplified mobile interfaces that abstract away blockchain complexity while preserving its benefits are needed to drive adoption.

The Path Forward

The future likely involves a hybrid approach where traditional financial institutions integrate blockchain technology rather than being replaced by it. This integration is already beginning:

Payment providers like PayPal have launched stablecoins (PYUSD)

Card networks like Visa are experimenting with stablecoin settlement

Mento is well-positioned within this ecosystem with its focused strategy by bringing FX onchain. By addressing the specific needs of cross-border payments beyond just USD corridors, Mento targets a significant gap in current offerings.

The $7.5 trillion daily FX market that underpins cross-border payments is entering a period of significant innovation. Onchain FX offers tangible benefits: lower costs, faster settlement, reduced risks, and greater accessibility.

For the millions who depend on cross-border payments for their livelihoods, these improvements represent real economic opportunity. Remittance-dependent regions could see billions in additional capital flow to recipients rather than intermediaries. Small businesses could access international markets previously closed to them due to prohibitive payment costs.

While challenges remain, the trajectory is clear. At Mento, the focus is on bringing FX liquidity onchain, building the infrastructure needed to bring cross-border payments into the modern age finally delivering on the promise of truly global, efficient money movement.

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