What Role Can Crypto Play in International Trade?

 In export, import, international business

This is a guest post by Brad Smith.

Cryptocurrencies, and the underlying technology, blockchain, have made waves around the world over the past few years. News headlines have highlighted the digital currencies’ potential to make instant billionaires, and the media has shared plenty of stories about individuals losing millions inadvertently. However, what received less attention is both cryptocurrency and blockchain’s ability to overhaul whole industries and sectors, including international trade and import and export.

According to the World Trade Organization (WTO), blockchain could revolutionize global trade completely. A 2018 WTO report notes that international trade could look “radically different” in 10 to 15 years. Before looking at how it may achieve this, here’s a quick overview of both cryptocurrency and blockchain.

Crypto and Blockchain 101

Cryptocurrency is digital money that has no physical denominations. Bitcoin is the most known cryptocurrency and has arguably impacted the financial world the most, but there are many others, including Ethereum, Litecoin, and Cardano. These currencies use cryptographic security.

Blockchain is a time-stamped and distributed digital ledger of transactions; like cryptocurrencies, it too is secured via cryptography. Recorded (blocks) and chained to one another with cryptographic tools, blockchain is one type of distributed ledger technology.

Using Crypto and Blockchain in International Trade

Both cryptocurrencies and blockchain have applications in international trade and import/export.

Early experiments with the latter have shown its potential to overhaul all aspects of the supply chain in several sectors, from sustainable salmon to oil and gas trade. The Harvard Business Review notes that blockchain can build speed, trust, and lead to greater transparency; it states blockchain can also “help supply chain partners with some of their challenges.”

In addition, data localization policies have proved difficult for many in international trade and import/export to navigate. But because they are distributed ledgers, blockchain technologies are, by default, relatively immune to data localization policies. As the WTO report notes: “local storage requirements and local processing of data, which constitute the backbone of most data localization policies, are automatically met.” The digital ledger nodes are automatically fulfilled, making it much easier for companies to hit the requirements.

The former, meanwhile, has also proven its worth in trade. When paired with blockchain in supply chain management, it helps maintain both authenticity and traceability. Cryptocurrencies are more secure from a security standpoint than traditional banking or financial institutions—despite what the media will have one believe, crypto is arguably the most secure financial asset.

There is also an additional privacy and anonymity aspect to consider. For example, a company may choose to use Bitcoin to protect financial privacy — or select another cryptocurrency for that matter. In this respect, cryptocurrency allows for decentralized trading; that is, there are no third parties, such as traditional financial institutions involved.

The role of cryptocurrency and blockchain in international trade and import/export is still evolving, as too are the currencies and distributed ledger technologies. While the primary application of both in context has been supplying chain management, other avenues and uses are also being trialed. Watch this space; we certainly are.

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Brad Smith

This was a guest post by Brad Smith.

Writer’s Bio

Brad Smith is a technology expert at TurnOnVPN, a non-profit promoting safe and free internet for all. He writes about his dream for free internet and unravels the horror behind big techs.

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