Circle Ventures portfolio company Arf is a global settlement banking platform that offers working capital and settlement services. Learn more in this Founder Story.
Arf is a global settlement banking platform that offers working capital and settlement services.
Arf is a Circle Ventures Portfolio Company.
What led you and your team to start working on Arf?
We built Arf to connect traditional finance and Web3, and show how digital assets like USDC can be used for cross-border payments.
There is more than $4 trillion locked in pre-funded accounts and it's unacceptable to Arf that global settlements don't happen at internet speed. So, we saw an enormous opportunity in the next wave of Web3 adoption.
To achieve this, we partnered with Circle and the Stellar Development Foundation (SDF) to enable financial institutions and money service businesses to make real-time global payments with USDC. Additionally, we developed Arf Credit Line, a short-term USDC-based working capital solution that helps to eliminate counterparty risk for cross-border payments. Arf currently provides short-term loans of 1-5 days for our clients to send money in real-time, with no additional collateral or pre-funding required.
We believe there is great value in showing the world how the finance industry can use these technologies. We've been serving licensed financial institutions for over a year and look forward to announcing our case studies with them.
What have been some of the most important lessons you’ve learned since launching Arf?
New financial products are more likely to succeed if they offer effective solutions to well-defined problems.
Having the necessary licensing and technological resources is crucial to be able to bridge the TradFi and Web3 worlds.
And lastly, we know that finance is about customization. There is no silver bullet or a one-size-fits-all solution. Being flexible, but never compromising on compliance is one of the most important perspectives one can adopt.
What pain points does Arf solve in Web2 and Web3?
Cross-border payments is a capital-intensive industry. The more payments that financial institutions facilitate, the more money they need to lock as pre-funding – that's why more than $4 trillion is tied up in these pre-funded accounts today. There are also more than 1.3 million contractual relationships and hundreds of bank accounts held in different countries, yet many times the finance industry can't move money in real time.
Arf solves the liquidity constraints in cross-border payments by helping to eliminate counterparty risk and pre-funding. Licensed financial institutions can instantly access short-term, transactional working capital through Arf Credit Line. All of these transactions happen on-chain with USDC, so they can track money transfers without the need for an intermediary.
This way, institutions can open new payment rails and grow their volumes in just one day without difficult technical integrations. They use the same global USDC treasury account we provide for all of their new rails and transactions, so they can easily manage treasury operations without having to open new accounts or keep balances in different countries.
As a licensed global settlement platform, Arf facilitates these payments by moving treasury in full compliance. We’re delivering the future of cross-border payments by bringing the best of Web3 and TradFi worlds together, enabling wider access to better financial services as a result.
What implementations have you adopted to increase the efficiency of your product?
Arf built its treasury APIs on Circle, specifically for the cross-border payments industry. We use USDC as a settlement asset as it's always pegged one-to-one to the U.S. dollar, backed by cash and cash equivalents, and regularly audited by the world's biggest audit and consultancy firms. In our opinion, USDC has proven to be the most reliable asset for business-to-business cross-border transactions.
We also implemented Stellar's open and interoperable protocols, which enabled us to start working with financial institutions around the world nearly instantly using USDC. SDF is one of the key actors in the financial ecosystem's growth and development today, and they are also one of the strategic investors of Arf, along with Circle. Arf launched the Line of Credit program with the support of SDF, enabling access to short-term programmable liquidity in Stellar USDC.
We received the Financial Services Standards Association License (VQF) in 2022, which affirms our commitment to providing custody, fiat and stablecoin settlements, payment intermediation, and lending services to our clients in full compliance with regulatory requirements.
Together with our partners, we are building banking rails to provide native on- and off-ramps in different regions, so that licensed financial institutions don't have to open crypto exchange accounts to get the benefits of USDC. All settlements between financial institutions are on-chain, which makes all of the money movement transparent and visible to all backers.
How has the company adapted to changes in the industry?
The crypto market has gone through a lot this year. I think there's an opportunity for us in talking about the transparency and security of attested digital assets like USDC as a response. It’s obvious that not all stablecoins are created equal, and transparency is key. Because all global transactions between financial institutions are on-chain with Arf, they are always transparent and visible.
An advanced finance ecosystem can't be achieved through offshore, unregulated, and opaque crypto firms. Arf is licensed in Switzerland and is working on getting licensed in other financial hubs in the world, as well.
I think that there is much more to what we can achieve with these technologies. I’m really excited to witness and actively take part in this transformation.
What are the key components to Arf’s success in 2023?
Global treasury management without correspondent banking networks and crypto exchange accounts is possible today with the right settlement assets, right compliance, and right technologies. Our goal this year is to show financial institutions, regulators, and central banks across the globe how this can be achieved.
Arf is in the process of getting licensed in the world's most important financial hubs. We will continue building banking relationships this year. We also plan to launch our own DeFi liquidity infrastructure and pools with different Web3 players, which will be a game-changer in the industry.
We are witnessing the opening of a new market, and are well aware of our responsibility as a trailblazer in this field. I think many more competitors will emerge this year, and surprising collaborations will keep happening. I'm very excited to see how we'll transform the finance industry together.
