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Does Global Trade Need A Global Currency?

A virtual currency like Bitcoin could open up an array of new markets, while speeding the worldwide exchange of goods.

Rimas Kapeskas | UPS

Rimas Kapeskas

Our world is getting smaller, flatter and more connected every day.

The rise of e-commerce has empowered consumers and changed the landscape for buying and selling goods, while transforming the worldwide economy.

This omnipresent demand for goods, regardless of the market, will soon get even more intense.

However, the current payment, clearing and settlement systems are major bottlenecks to the flow of global trade. They are inefficient, have long settlement times and high-cost fees and exchange rates.

Today’s technologies have enhanced the global exchange of information about goods and bolstered transportation networks moving items across borders. People around the globe have access to virtual marketplaces that feel borderless.

But consumers are still stuck in the credit card age of payments for those transactions. Sure, credit cards have been around for 65-plus years. But they are ripe for a technological leap.

Breaking down barriers

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 A unified, global currency is the ideal solution, as it would simplify cross-border transactions.

If you’ve ever traveled abroad, you know that converting cash or using your credit card is often a hassle.

Calculating fair exchange rates and the fees involved is like trying to solve a math problem without knowing the variables.

In the world of global e-commerce, it’s the same problem.

Rules and regulations, as well as currency, vary by country. Unfortunately, not all merchants are capable of managing that level of complexity online.

If someone living outside the United States doesn’t have an American bank account and credit card, it’s nearly impossible to complete an online purchase from a U.S. retailer.

Put simply, a number of barriers can get in the way of buying what you want once you cross borders, even online.

A unified, global currency is the ideal solution, as it would simplify cross-border transactions.

But as recent events have proven, even regional currencies like the Euro struggle to keep national economies in order and are far from perfect in handling the complexities of a global economy.

[Also on Longitudes: Technology: Disruption and Debate]

A virtual hope

Technologies are advancing, even if governments struggle to keep pace. These platforms are fostering a globally accepted exchange mechanism, which would not require a unified monetary system.

This is where virtual currency could come into play. Digital money can be sent across borders without going through multiple intermediaries and currency swaps.

If recognized, its value is the same regardless of where you do business, eliminating friction points and facilitating the faster flow of goods.

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How we handle, store and exchange currency will continue to evolve.

In 2008, Satoshi Nakamoto published a paper, Bitcoin: A Peer-to-Peer Electronic Cash System, outlining the details of a payment system that would allow individuals to send and receive payments without intermediary financial institutions. This was the birth of Bitcoin.

It was not the first virtual currency but the first application of a new block-chain encryption technology.

While Bitcoin has suffered from a fair share of controversy and volatility in its nascent stages, the block-chain technology has created numerous possibilities for improving money transfers and simplifying payment processes – and revolutionizing many other industries.

More than 100,000 businesses already accept Bitcoin, including large companies like Microsoft, Home Depot, Dell, CVS, Expedia and Amazon.

Startup companies are tapping into hundreds of millions of dollars in venture capital investments.

Leading financial institutions and technology leaders like Barclays, Citigroup, the New York Stock Exchange and IBM are also making investments in the technology.

Many of your transactions today are already virtual and happening online.

It is no surprise, then, that currency will become easier, cheaper and more secure. Our whole concept of money and how it gets exchanged is going to change as we become increasingly digitized.

How we handle, store and exchange currency will continue to evolve – it’s just a matter of at what speed and where we will see it next.

[Also on Longitudes: The Digital Economy, Trade Agreements and the 99 Percent]

Opening up trade

For global e-commerce to thrive, the movement of goods, funds and information must be both secure and seamless. Digital currency would allow consumers and businesses of all sizes and in all places to participate.

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Virtual currency seems like a logical next step that could bring markets closer together and facilitate faster trade.

The fastest growth globally will likely be in the emerging markets of Africa, the Middle East and other areas of the world that have been traditionally less developed.

Vast populations in these communities are getting better access to technology and to capital, allowing them to easily exchange money, goods and services.

Mobile payment companies like M-Pesa are giving millions of people access to the formal financial system, stimulating business and reducing crime in otherwise largely cash-based societies.

From our vantage point, the driving force globally is that all companies and consumers can easily do business with one another.

In other words, it doesn’t matter where those goods are coming from – UPS can provide the transportation solutions to ensure speedy delivery.

We just need the technical and regulatory advances that will allow global financial transactions to happen.

Virtual currency seems like a logical next step, one that could bring markets closer together and facilitate faster trade.

Usually, the advances that stand the test of time are the ones that most effectively eliminate barriers and make commerce easier – perhaps that’s why global trade is so ready for a global exchange system that enables seamless transactions. goldbrown2

rimas kapeskas sepia
Rimas Kapeskas is the Managing Director of the UPS Strategic Enterprise Fund, a corporate venture capital group that focuses on developing critical partnerships and acquiring knowledge returns from its investments in information technology companies and emerging market-spaces.

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Reprinted with permission of Longitudes, the UPS blog devoted to the trends shaping the global economy.

24 Comments

  1. Erica

    Nice insight. I have to respectfully disagree with the promotion of a global currency. Having different currencies because different countries exist is the “cost” of doing business. As an American, my values and culture are different from other countries. I don’t want my self-interests and freedom to be manipulated by the banking industry because they are trying to reduce the costs of doing business. There are too many violent and unnecessary conflicts around the world. Why doesn’t the banking industry promote and pour resources into efforts that promote peace? Why doesn’t the banking industry promote and pour resources into Institutions that promote, advocate, and train on conflict resolution, peace building activities, and the elimination of violence? Why doesn’t the banking and financial industry promote and pour resources into a business model the measures success on people, sustainability, and profit? Thumbs down for global currency. Too much risk. Too much vulnerability. The cost to maintain, implement, and manage is too expensive. Too much risk for fraud and corruption. No accountability. If it were implemented, the people around the world who fall in the 90 percentile of the least amount of economic resources would pay for the cost of the system implementation. Really? Do I want to drink clean water and eat today or do I want to pay for a global currency system to be put in place?

    1. Ozlanthos

      Interesting. However I think you are off a little bit. What the author of this article forgot to mention is that Bitcoin is an open source project. That means that you will NEVER be forced to be subject to a single currency standard ever again. There are already over 2000 currencies similar to Bitcoin, that are based on it’s source code. In the years to come, I expect this trend to continue, and magnify. The truth is that anyone can create a monetary unit now, and almost all of them are digital in nature.

      As for the banking industry not investing in peace? Peace doesn’t have as high a profit margin, nor does it have incidents of re-occurring borrowing like war does. The problem there being that the bankers running the banks are short-sighted and greedy. so they don’t bother to think far enough down the line to consider what the loss of demand incurred by disrupted economies and dead people will do to their bottom line.

      -Oz

    2. gubatron

      “As an American, my values and culture are different from other countries. I don’t want my self-interests and freedom to be manipulated by the banking industry because they are trying to reduce the costs of doing business.”

      And this is what you missed, Bitcoin isn’t manipulated by any central bank, it’s absolutely open and it responds to no nation’s agenda. Its liquidity issuance is predictable (dictated by an algorithm which can only be changed with a super majority of consensus by those that participate on the bitcoin network) and 100% trustable, every 10 minutes a predictable number of coins is issued and distributed in the economy, if it were rated as a credit entity it’d have a perfect score.

    3. Jay

      Erica, respectfully misunderstanding virtual currencies like bitcoin and what the author was getting across. A) bitcoin puts an end to corrupt governments from any nation because bitcoin exists on an open source Internet protocol called the block chain that works just like email. No one controls email. No one controls bitcoin. B) Bitcoin ends the ability of all nations to fund warfare and promotes peace. You can’t print bitcoin out of thin air like our fed every central bank is doing now devaluing all currencies globally. C) The global currency system of bitcoin is already in place and benefits both the third world as well as the west developed world. Bitcoin offers instant free money transfer globally from person to person. By separating the government from money you are giving every human on the planet total economic freedom. This will usher in an economic boom worldwide that has never been seen by taking the power and control away from the elite and giving it to the people. Using and transacting in bitcoin is the ultimate expression of freedom from oppression.

    4. Aristotle Cajetan

      I don’t think you read his article, Bitcoin is the total opposite of centralized banking institutions which you so much decry.

      You are actually agreeing with him, and yes he would likewise agree with your sentiments. He says the same thing you are saying in the article, Bitcoin solves the issues you are talking about. It solves the problem of theft, fraud, corruption etc…

      Being an American doesn’t mean anything, ultimately what matters is people exchange their value for other people’s value in a peer to peer fashion. If you don’t want to transact with NON americans, or don’t want non-americans to transact and buy your products. That is your choice, but everyone else in the world all they want to do is just trade with each other and cut out the middle man, the bankers. Who make money from money, for simple 1’s and 0’s traded across bank accounts. Now obviously I am doing a gross simplification, there are many other pseudo things they do. However, once bitcoin could be scalable it could replace and do better everything your local banker does. Without the problems of banks, and people in general.

      This post was a good one, good job ;D. Glad someone at UPS has the mindset to recognize something when it works.

    5. Philip Dartnell

      Erica I understand your concerns about a global currency, but they’re the concerns of a global currency instigated by governments and their banking cronies. If Bitcoin were to become a global currency of sorts (and granted there are many hundreds if not thousands of issues that would need to be resolved before that could happen) then it’s an entirely different scenario. Bitcoin is not “owned” by anyone. It’s a peer-to-peer financial network that completely eliminates the “trusted” middleman (i.e. the bank, the government issuing authority, the credit card company, the payment processor). Bitcoin is an open source technology that software developers can contribute to, but not outright control. The distributed nature of the network with millions of computers running the Bitcoin code and performing the blockchain (public ledger) transactions means it’s harder to manipulate as consensus needs to be reached amongst all the people running those computers before a major change can occur. Certainly no government can suddenly decide to “print bitcoin” like the US and the EU just keep doing with their currencies to delay the inevitable crash that’s going to come regardless (and be far worse because of their inept attempts to control their economies). Bitcoin has a fixed number of units that will ever come into existence and a deflationary curve for new bitcoins that are created through the mining process. It’s not too dissimilar to gold in terms of how many new bitcoins will come into circulation each year, but it’s infinitely more liquid than gold and offers rapid electronic transaction abilities by comparison. There are many many technical issues still to be worked out to make Bitcoin into a financial network that could handle the volume a world-wide currency needs to be able to handle, but these are being worked on now (albeit with considerable controversy and some difficulty). Bitcoin is one of the most stunning developments of recent years and is surely going to have quite an impact as the current world financial systems starts to break.

    6. Anonymous

      One of the characteristics of the Bitcoin invention is that it cuts out banks entirely. You now have a third option besides banks promoting war or promoting peace: the public deciding where the money goes. The nice thing is that it is not a concept – it is fully operational, if you wish you can start using it now to send money across the globe with low friction.

    7. Joe

      Erika,

      I can totally understand your concerns. But you are missing the fundamental differences that bitcoin brings to the table. For the entire history of mankind, any financial system has relied on a small group of “trusted” people in order to function. These people inevitably become corrupted by the power they steward.

      Bitcoin does not rely on people to operate. This is a radical shift that can be difficult to grasp at first. Instead of needing to trust a third party to process transactions, it relies on some fancy math and open source code that can be understood and vetted by anyone with the skills to do so. It is an open protocol, that is accessible to anyone with connectivity across the globe. That includes the billions of people with no banking access at all and the many thousands of Americans who are credit zombies, homeless, or otherwise locked out of the banking system.

      The blockchain is an open ledger. Although some degree of anonymity is possible using bitcoin, it is much easier to do transactions that are strongly transparent. Users are protected from identity theft automatically as it does not require your name, address, social security number or any other personally identifying information to participate. Also it is a push based system, like cash, where a single payment is sent out and only that payment. None of the information sent can be used to pull future transactions from your account like a credit card.

      One can publish their receiving address without risk, if they choose. Since the entire record of every transaction is available to every user of the system, someone who understands how to read the blockchain, could follow that money. We have never before used a system that would allow members of the public to audit the books before, and I am very excited about the potential uses in things like charitable fundraising, and political contributions.

      Bitcoin empowers the individual. We each get to decide how to spend it, and I believe that the vast majority of earthlings will chose not to fund violence when given that choice. At least not without a very compelling reason.

      Although the cost of having world class security for a tiny portion of the worlds transactions looks very high right now, the energy cost per transaction gets better and better as the network grows. When compared to the current way of doing things, with armored cars and all the physical and digital infrastructure it takes to run a global financial system that excludes the majority of the world’s population, bitcoin starts looking pretty good in terms of costs.

      Bitcoin is not ready for global adoption. it is risky, and not very user friendly. It is a raw, but functional protocol. But we have seen hundreds of millions of dollars of venture capitol going into tech startups working on making that protocol easier and safer for the average user. An amount that grows every year since it was invented. As those products get developed and come online, I expect we will see a lot of changes happening in a relatively short period of time.

      Bitcoin will not solve all our problems, it might not even be the iteration of this technology that eventually takes over the market. However it is the biggest and most exciting innovation that financial industry has seen in last century.

    8. starvinlikemarv

      I have no idea what you’re talking about. You don’t have to pay anything for bitcoin “implementation”, it already exists. I send bitcoins every day. It isn’t managed by any bank. It wasn’t created by any bank. It’s peer-to-peer and decentralized.

    9. jon

      ” I don’t want my self-interests and freedom to be manipulated by the banking industry because they are trying to reduce the costs of doing business.”

      If only there were a virtual currency that banks didn’t have control of…

    10. Wormy

      “I don’t want my self-interests and freedom to be manipulated by the banking industry because they are trying to reduce the costs of doing business.”

      Excuse me, which bank controls bitcoin?

    11. bitman

      sounds like you haven’t done any research on Bitcoin, a trustless, decentralized, peer-to-peer currency and payment system that is secured by the most powerful computer network on the planet.

    12. livingncyn

      Not to be rude, but you clearly know very little about bitcoin.

      From the wikipedia page (https://en.wikipedia.org/wiki/Bitcoin): “The system works without a central repository or single administrator, which has led the US Treasury to categorize it as a decentralized virtual currency.” It is not controlled by any government or big bank.

      There’s no need to for poor people to pay for the cost of implementation… it’s already been implemented since 2009.This currency actually has the potential to help poor people because they can transfer any amount they want, for pennies, instantly without the permission of any entity. So foreign workers won’t have to pay money transfer companies like Western Union large fees to transfer money back home. People under capital controls like those in Argentina, where it costs something like 30% tax to get your money out of the country, can just send it out anonymously with bitcoin, and avoid the tax.

      There’s a lot more to be said. You should spend some time researching it on the wiki page. Bitcoin is the opposite of the global currency you’re worried about.

    13. livingncyn

      Bitcoin is the opposite of the global currency your worried about.

      From the wikipedia page: “The system works without a central repository or single administrator, which has led the US Treasury to categorize it as a decentralized virtual currency.”

      It’s not controlled by any central authority, like a government or bank. People have already been voluntarily paying (and getting compensated in return) for its implementation since 2009. That cost won’t be forced on poor people.

      You should really spend some time researching it on the wikipedia page (https://en.wikipedia.org/wiki/Bitcoin) and beyond. It actually has the power to help individuals more than governments and banks, because it was designed so that it could not be controlled by governments or banks.

    14. livingncyn

      Virtual currencies utilizing blockchain technology developed by governments and corporations have the potential to cause some of the problems you are concerned about, but bitcoin suffers from none of them.

      “The system works without a central repository or single administrator, which has led the US Treasury to categorize it as a decentralized virtual currency.” – From the bitcoin wikipedia page: https://en.wikipedia.org/wiki/Bitcoin

      I would suggest you do some research on the wiki page and beyond. Bitcoin is the antithesis of the global currency you’re worried about.

    15. Philip

      I suggest that you re-read the article because you seem to have missed a lot. Bitcoin isn’t based through financial institutions, its transactions are done on a system free of intermediaries.

  2. TheButterZone

    Governments can’t stop bitcoin without shutting down the internet and jamming all radio frequencies. What governments CAN do is block free trade at Customs. We have global shipping. We have global currency. What we need is global abolition of laws and agencies that infringe victimless economic liberties.

  3. Pingback: Blockchain and the Digital Currency Revolution | Longitudes

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