After years of skepticism about their security, value, and staying power, it seems that cryptocurrencies like Bitcoin are ready to take on the world markets. There’s serious speculation that central banks will begin to hold cryptocurrencies in 2018. Investment firms such as Goldman Sachs have released information to clients about investing in Bitcoin, and CBOE Holdings has begun to sell Bitcoin futures.
This means the time has come for those in international business to look at how Bitcoin and other cryptocurrencies will affect global finance.
Cryptocurrencies are now predicted to disrupt the way people do business, and those buying and selling across borders stand to benefit.
The basics of cryptocurrency
Put simply, cryptocurrency is a digital financial exchange for goods and services, but cryptocurrencies like Bitcoin are so much more complex.
Bitcoin can be purchased as a basic money exchange and then used as currency. Every time money is exchanged through Bitcoin or a similar cryptocurrency, that transaction is recorded in a detailed public ledger. The ledger forms a long chain of verified transactions in chronological ordered. These ledgers are referred to as blockchains, and the blockchains are a big part of what excites people about the possibilities opened up by cryptocurrencies.
The benefits of cryptocurrency for international trade
For those buying and selling goods and services across borders, cryptocurrency offers a host of benefits. Some of the cryptocurrency and blockchain technology are poised to disrupt trade finance include:
- A lack of exchange rate. If you’re dealing with many international suppliers and buyers in a variety of countries, you have to deal with a myriad of exchange rates. If everyone is using Bitcoin, however, you’re all dealing in the same currency with the same value, without the constant hassle of monetary exchange.
- Fast money movement. Cryptocurrency transactions are near instantaneous. The transfer itself posts immediately, and it takes only about 10 minutes for payments to be validated in the blockchain.
- Secured payments. The money you receive when you take a Bitcoin payment is also secure. Users need to have the money available upfront, so there’s no chance of payments bouncing or credit transactions being canceled.
- Lower taxes and fees. Because cryptocurrency is a peer-to-peer monetary system, there are no taxes that govern them, and transaction fees are almost nonexistent.
- Detailed records. The blockchains created from cryptocurrency transactions create clear, secure records that can be tracked and verified. There’s talk of tying contracts and shipments to transactions within the blockchain to make business and logistics easier to track. With blockchain technology backed by cryptocurrency, processes could become more efficient, easier, and transparent. In fact, companies are so interested in the possibilities of blockchain technology that Danish shipper Maersk has partneredwith IBM to pilot a blockchain shipment-tracking system.
The drawbacks of cryptocurrencies
Of course, there are drawbacks to cryptocurrency that have slowed its adoption. First and foremost, the future of cryptocurrencies remains uncertain. While a single Bitcoin is now more valuable than an ounce of gold, economist and financial heads warn that cryptocurrency is another trend that will result in a burst bubble. From a daily user standpoint, there are problems with cryptocurrency as well. Bitcoin isn’t legal in all countries, and therefore can’t be used everywhere. And because users must have the cash on hand to make purchases, buying on credit — which businesses often do — isn’t yet a possibility.
The future of Bitcoin in international trade
While many are debating the future of Bitcoin as a tech bubble versus a viable long-term currency, it’s likely at least some of the technology created by Bitcoin is here to stay. From quick transfers to the thorough records created by blockchains, businesses and institutions are looking at how they can use cryptocurrency and related technologies to make doing business easier and cheaper.
Regardless of how the future pans out for cryptocurrencies, it’s clear that savvy business owners should be exploring cryptocurrency and blockchain technologies to see how they could benefit and make a move to capitalize on the technology.