SAP recently announced the launch of an experimental digital currency hub to allow companies to test cross-border payments for business transactions using blockchain-based stablecoins.

For now, users can test using Circle’s USDC and EUROC stablecoins to pay international bills, but only on a test blockchain with play money.

It is well known that cross-border payments are slow, unpredictable and expensive. In contrast, stablecoin payments are final in a matter of minutes and can be very cheap. This is provided that you use a network with low gas rates.

SAP believes that there are two things that prevent companies from using blockchain payments. The first is the volatility of cryptocurrencies that (some) stablecoins address. And the second is the lack of connectivity to accounting systems. We would say that there is a third. Payment recipients must be willing to accept stablecoins and have the ability to receive them.

When someone pays a bill, an accounts department typically follows up through a bank account or credit card bill. With blockchain that is a bit more complicated.

That’s where SAP’s digital currency hub comes in, connecting the blockchain ledger to the account system, so payment is easily tracked in conventional ways.

Some central banks are not that interested in stablecoins, which is one of the motivations for introducing central bank digital currencies (CBDCs). The European Central Bank recently said that it does not want to see stablecoins backed by central bank money, which means they carry some risks. For example, when Silicon Valley Bank failed, the USDC temporarily lost its peg.

The efficiency benefits of blockchain payments could threaten the lucrative business of corporate banking. Therefore, while CBDCs are taking their time to progress, banks are beginning to explore deposit tokens. For example, JPMorgan’s JPM Coin is a blockchain-based bank account, but the bank is also exploring deposit tokens, just like German banks. The SAP move may be a sign that they need to do it faster.