CONDUCTING INTERNATIONAL TRADE IN THE CRYPTOCURRENCY ERA
Since the global economy recovered from the recession of 2008, International trade among countries once again surpassed the pre-recession figures. At the end of the year 2017, global export and import values stood at USD 14.6 Trillion and USD 14.7 Trillion respectively. The overriding majority of this trade was financed with UCP 600 letters of credit and all other electronic means of payment. The whole process involves various counterparties like banks, switch providers, international agencies etc. and will typically take a long time to complete payment.
In the not too distant future, advocates of blockchain technology are convinced that it will play a prominent role in financing international trade. Frankly speaking, this belief is not entirely baseless if one critically examines the trends.
It is now a decade since the advent of cryptocurrencies and in all these years, these blockchain-based currencies have been dogged by several issues concerning security, volatility in value and staying power. Yet it seems that cryptocurrencies, particularly the leading ones like Bitcoins are poised to take over the global trade system. Many governments are already changing their approach to cryptocurrencies and are promulgating laws to either relax erstwhile regulations or even to promote the use of cryptocurrencies. In countries like Japan and elsewhere, Bitcoin has been officially declared as legitimate means of exchange. There is therefore credence in the speculation that some Central Banks are likely to begin holding cryptocurrencies in the near future.
Bitcoin Rules the Future
Bitcoin and her sister crypto coins are poised to take on the globe! Big Banks and Investment firms such as Goldman Sachs and Norway’s Skandiabanken bank are betting on this. More international Financial Institutions are sending information to their clients about investing in Bitcoin. In a move which captivated many analysts at the end of 2017, one of the world’s leading exchange holding companies, CBOE Holdings Incorporation, began trading Bitcoins on its exchange platform, CBOE Futures Exchange. All of these are the necessary toddling steps of the technology that is destined to rule the world.
Blockchain, the technology upon which Bitcoin and all other cryptocurrencies are built, is equally important to the topic. It provides the unique advantage of a decentralized storage and management which is different to the current reality of payments for international trade being managed and dominated by banks, governments and their various agencies.
Introduction of cryptocurrencies to global trade will inevitably lead to the disruption of the present order by taking control away from the banks and government to the benefit of cross border traders who will no longer be shackled to the rules and regulations applicable today. For this reason, it is critical for businesses involved in international trade to study Bitcoin and her sister cryptocurrencies to fully understand how their large scale deployment will affect global trade. Express Bitcoin Postage is already studying the system and are already offering a robust payment option for your postage.
Recall what digital cameras did to polaroid? Or how e-mail affected the post office? Blockchain and Fintechs now pose the same threat to Banks and international payment card providers. This is why many of the legacy businesses are waking up to embrace the new technology rather than be wary of it. A good example is how Ripple XRP became quite a popular mode of executing international money transfers by banks.
In February 2018, package delivery giant, UPS, pioneered a locker bank concept based on Distributed Ledger Technology which will accept Bitcoin and other major cryptocurrencies. Many months earlier, in September 2017, the United States Postal Services (USPS) filed patent for a User Identity Verification system based on blockchain technology. Yet, long before now, since as far back as 2013, USPS stamps as well as labels and postage of several logistics, mail shipping and package delivery companies’ have been available for purchase using Bitcoin.
For the most part of Bitcoin’s existence, many holders buy Bitcoin rather as a type of financial investment to sell when the rate goes up. They are simply satisfied to trade their Bitcoin to USD at a profit. In the future, and the signs are already glaring, users will utilize Bitcoin mainly for transactional purpose. A valuable transaction that is already being paid for with Bitcoin postage is parcel and mail delivery. Be it local or international shipment, the process is essentially the same as Bitcoin postage bypasses all known hassles associated with cross-border payments.
Advantages Of Bitcoin Postage
a) Exchange Rate – whenever you have to deal with cross-border counterparties, avoiding the hassles of exchange rate is inescapable. Now imagine a transaction across three or more territories! With Bitcoin postage however, it is a level playing field as the currency remains same across territories.
b) Speed – in typical cross-border payments, it takes time to complete the process as there are many banks involved in the transaction. It is therefore a slow and painstaking method of payment that may even last a couple of days before the beneficiary receives value. With Bitcoin, the transfer is near immediate as validation will only take up to 10 minutes.
c) Security – finding a secure payment channel that is fail proof and not easily defrauded is key to foreign trade. Paying with Bitcoin has the advantage of the security of blockchain technology as transaction cannot be duplicated nor can non-existent payment be faked. Furthermore, once a transaction has been confirmed on the blockchain, it is irreversible.
d) FX Constraints – besides the stated hassles with exchange rate in current international payment methods, there is also the usual scarcity of major trading currencies in some countries. In this case, a party has currency “A” in the bank to pay with, however the transaction is delayed as the bank cannot access currency and “B” required by the beneficiary. This type of negative situation is a thing of the past with Bitcoin.
e) Bookkeeping & Records – Bitcoin payment offers detailed and secure records of all transactions and this is made available on a public ledger and can always be verified immediately. Such a system allows for real time tracking leading to a more transparent and efficient way of doing business.
In a nutshell, a superior payment method to what is currently obtainable is now very much feasible and online entities like Express Bitcoin Postage are deploying it in full to serve you better.