Forex exchange layer demonstrates the possibility of DeFi cross-border payment use case

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Forex exchange layer demonstrates the possibility of DeFi cross-border payment use case

Remittance payments are essential to support vulnerable classes of society; unfortunately, high fees often limit their impact.

Remittance payments are at an all-time high due to the COVID-19 pandemic. To paint the picture, Mexico’s payments alone have amounted to more than $50 billion, surpassing all other sources of foreign income. This value represents only a subset of the estimated $540 billion reported in 2021.

While remittances are essential to ensure families back home are supported, the process favors the intermediary over the sender, with high fees of up to 6-7%. These fees represent a detrimental percentage, especially when considering that remittances are often a critical lifeline for those in need.

Reducing these fees then comes down to eliminating the multiple intermediaries involved in the transaction as well as reducing its duration, a process eased by decentralized finance (DeFi). In response to this potential use case, Jarvis Network shares, “Decentralized finance has matured so much that it can now be used as a back end to power real-world applications like remittance! In a few years, most of the global remittance companies and applications will be leveraging stablecoins and on-chain Forex.”

At present, fiat-backed stablecoins have proven their use for domestic payments; unfortunately, they often lack the liquidity necessary to fulfill the remittance use case. Consider that converting Tether (USDT) to U.S. dollar (USD) can essentially be done in a one-to-one ratio. However, when currencies must be exchanged for, say, the Japanese yen (JPY), transacting parties may run into stablecoins lacking liquidity.

Since its inception, Jarvis Network has taken advantage of stable and liquid on-chain fiat to increase the number of users onboarding into DeFi. Their efforts have resulted in a solution to the remittance use case, a product of working alongside Curve and fiat-backed stablecoins.

With Curve, Jarvis effectively fills this gap as a Forex exchange layer as the cement that connects all fiat-backed stablecoins that have an effective fiat on and off-ramp, moving funds internationally with an instant settlement. The model can then be extended to a broader range of stablecoins, thereby fulfilling the remittance use case.

Cross border payments

In practice, Jarvis Network relies on their stablecoins, jFIATs, like jEUR, jCAD or jBRL, respectively Euro, Canadian dollar and Brazilian stablecoins.

jFIATs have a strong peg and on-chain liquidity as they are over-collateralized with USD coin (USDC, BUSD on Binance Smart Chain) and can be converted for the underlying collateral without slippage. By combining two conversions, jFIATs can be converted for other jFIATs, using USDC as a bridge, enabling a zero-slippage on-chain Forex market.

These jFIATs are paired in Curve’s pool with their equivalent fiat-based stablecoins, connecting the latter altogether through this on-chain Forex market.

For example, EURS from Stasis, paired with jEUR, can be exchanged for CADC from Paytrie, paired with jCAD, by converting jEUR for jCAD.

Therefore, Curve pools can help transfer from, say, the BRL to EUR. In the back end, the transfer would take BRL to BRZ, a BRL stablecoin issued by Brazilian Digital Token, swap its equivalent in jFIAT (jBRL) in an Ellipsis pool, a Curve fork on the Binance Smart Chain, convert it to jEUR on Jarvis Exchange, and sell it back to Euros using Mt Pelerin, a fiat-crypto over-the-counter (OTC) desk based in Switzerland.

These pools have allowed Jarvis Network to open the remittance corridor cheaper than what traditional actors are offering. As a result, their solution has already been used on Polygon and BNB Chain. There were users sending money from Switzerland to Canada and from Switzerland to France on Polygon, and several transactions registered from France to Nigeria and from Brazil to France on the BNB Chain.

As of today, it takes a DeFi power user to leverage this remittance corridor, but one day soon, it is expected that applications will start to be built on top of it to provide a seamless remittance experience.

Launching more stablecoins

Since October last year, Jarvis Network now reports over $130 million in Forex spot swaps on their primary market, $90 million on their secondary markets and another $12 million in fiat on and off-ramps. Their team continues to work closely with Mt. Peletrin, an OTC trading desk, to perform fiat to crypto as well as crypto-to-fiat transactions across multiple networks to facilitate accessing on-chain liquidity and remittance corridors to their community.

Over the next year, Jarvis aims to launch more stablecoins on more chains while also deploying the second version of their protocol to enable scaling and launching currencies baskets and derivatives like Forex options and futures.

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