Global corporations are facing greater complexity than ever when it comes to transferring trapped cash across borders. The good news is that new digital solutions may be able to address fragmentation by improving efficiency and visibility.

Consider a few hypotheticals:

• A multinational corporation wants to develop a manufacturing site in a foreign country and has plenty of its own cash to do so – but this would be hampered by foreign exchange or capital transfer restrictions.

• On a Friday afternoon, an overseas subsidiary needs liquidity, but the parent company knows the banking window is closed for the weekend.

• A corporation needs to pay debt at the headquarters level but has earnings trapped in a developing nation with a depreciating currency.

Cross-border liquidity mobilisation is often most complex in China and South-East Asia, while the Middle East also includes Islamic banking requirements.

From a US standpoint, meanwhile, globalisation has created “treasury models that span multiple legal entities, banking relationships and funding arrangements,” Standard Chartered explains in a recent white paper.

“Across North America, the challenge is often less about regulatory barriers and more about organisational complexity,” Standard Chartered writes. “Capital generally moves more freely across the region than in many parts of Asia, placing greater emphasis on treasury structure and execution.”

Americas-based treasurers should not take for granted that their longstanding accounts still fit into evolving best practices.

“While many of these structures were designed to optimise liquidity under earlier tax and regulatory frameworks, some have persisted long after the original rationale has diminished,” Standard Chartered notes. “Where integration is incomplete, liquidity can remain dispersed across entities, accounts and structures that no longer align with the organisation’s current treasury objectives.”

In South America, “currency and regulatory restrictions continue to act as a bottleneck for liquidity concentration,” the bank adds.

Treasurers need constant visibility into account balances, taxation, currency and regulatory factors.

“In a fragmented landscape, liquidity advantage can still be achieved through meticulous design,” said Sandrine Jourdainne, Standard Chartered’s Global Head of Deposits and Liquidity Management.

Stablecoins to the rescue?

Some longstanding trapped cash challenges could be overcome with a new solution: stablecoin rails.

“Trapped cash is an architecture problem: legacy rails run on banking hours and multi-day clearing, so working capital waits,” blockchain innovator Polygon Labs explained in a July press release.

In the above hypotheticals, “teams borrow short-term to cover gaps they already have the capital to fill,” in effect paying interest unnecessarily. Polygon, developer of the Open Money Stack, notes the “compounding cost” caused by “idle balances that earn nothing, excess accounts that generate fees and hedging decisions made on stale data.”

Polygon emphasises that stablecoin settlements are a “single event,” with payment and settlement no longer a two-step process with clearing in between. That simplifies reconciliation, offers an audit trail and makes working capital available immediately.

More than US$2.6trn in stablecoin transfer volume has settled on the Polygon chain, according to the Cayman Islands-based company. The median cost per transfer is approximately US$0.002, making stablecoin settlement a cost-effective and speedy primary rail.

“The hard part for treasury is the regulated fiat access, wallet infrastructure and cross-chain routing around the stablecoin, not the coin itself,” Polygon adds.

Operationalise and optimise

Whether a corporation is pursuing a stablecoin rail or not, it may be time to assess trapped cash exposure. Standard Chartered offers “a treasurer’s four-step playbook” to address the liquidity fragmentation and improve cash mobilisation. The first three measures are to diagnose constraints, define and prioritise the liquidity agenda and align structure and execution across market.

The fourth suggestion – “operationalise and continually optimise” – represents the ongoing approach that treasurers should pursue. Standard Chartered mentions the Straight2Bank liquidity platform and PrismFX currency solution as examples of tools that can enhance visibility into connectivity.

“Treasurers need real-time visibility of balances, commitments, liquidity forecasts and intercompany positions, and the ability to see and deploy available liquidity under real constraints,” the Standard Chartered essay concludes.