Blockchain Interoperability for Cross‑Border Payments through Settlement Protocol Analysis

Abstract

Cross‑border payments remain characterized by high costs, slow settlement times, limited transparency, and fragmented regulatory compliance. Blockchain and distributed ledger technology offer a transformative alternative, yet the proliferation of isolated blockchain networks has created a new challenge: the interoperability gap between distinct ledger systems, between DLT and legacy infrastructure, and across differing regulatory regimes. This article provides a critical analysis of blockchain interoperability protocols for cross‑border payment settlement, examining three principal approaches: notary‑based schemes, hash‑time‑locked contracts, and relay‑chain architectures. The analysis evaluates recent industry implementations including Swift's shared ledger, the Bank for International Settlements' Project Agorá and Project Rialto, and emerging cross‑chain payment channel protocols. Findings indicate interoperability as the decisive factor in DLT adoption for cross‑border payments, with hybrid models combining shared ledgers, tokenised central bank money, and ISO 20022 standards demonstrating the most promising path forward. Persistent challenges include latency‑security trade‑offs, regulatory fragmentation, and the absence of global governance for cross‑border DLT settlements.