Interoperability of Blockchain Systems in Banking: Assessing the Role of Cross-Chain Technologies in Facilitating Seamless Global Transactions

Abstract

The growing usage of blockchain technology in the banking industry has brought attention to how important it is for various blockchain systems to be interoperable to facilitate smooth international transactions. To enable communication and data transfer between various blockchain platforms, cross-chain technologies present a variety of opportunities and obstacles. This study explores these issues in depth. In the context of global banking, the study attempts to evaluate how well these technologies work to address fragmentation problems that impede transactional fluidity and scalability. Through an examination of novel cross-chain structures such as atomic swaps, relays, and hash-lock time contracts, this study assesses how well they can improve operational effectiveness, shorten settlement times, and lower counterparty risk. Additionally, the study looks into how these technologies may affect data privacy, security procedures, and regulatory compliance in international financial transactions. In the end, this paper aims to further the conversation on blockchain interoperability by highlighting the main facilitators and obstacles to global banking transactions that are frictionless, emphasizing the need of cross-chain solutions for the development of decentralized financial systems.