The world has been connected in terms of trade and commerce for a long time, and with the advent of the internet, this only appears to be becoming more apparent. Aside from the import and export of raw materials, ordinary people can now patronize enterprises from distant parts of the world online, shrinking the global business sphere even further.
The rise in popularity of cryptocurrencies over the last decade has had far-reaching ramifications for global trade and commerce, some of which may undermine the current regime as we know it.
Cryptocurrency in Global Trade
Every country on the planet is endowed with some type of natural resource, as well as goods. At the same time, no country on the planet has all of the natural resources or products it needs to function, necessitating global trade. When two countries engage in commerce, the resources or items in question must be paid for, which is done with paper money.
Prior to the emergence of cryptocurrencies, governments could only pay for foreign exchange using fiat currency. However, like with any centralized system, the use of centralized currency often came with a drawback: the potential of sanctions from powerful countries.
To put this into perspective, we could look towards the case of Venezuela, which has been subject to economic sanctions from the United States for several years now. As a result of these restrictions, the country has experienced hyperinflation, and its population has suffered economically.
Nevertheless, in recent times, the country has started to use cryptocurrencies to bypass sanctions for imports from other countries. It has been reported that they intend to increase their use of cryptocurrencies to enable trade with nations like Turkey and Iran.
Meanwhile, North Korea, another nation sanctioned by the U.S., has been accused of utilizing a state-sanctioned hacking group to steal Cryptocurrency in order to fund its nuclear weapons program. Previously, it would have been near-impossible to work around a country's sanctions, but with cryptocurrencies, the wall appears to be breaking down. Venezuela even established its own national cryptocurrency, the petro, to retain its economic sovereignty.
The ramifications for countries like Venezuela and North Korea if they succeed in dodging sanctions by adopting cryptocurrencies are massive.
What it means
The United States has long been a world power due to the strength of the US dollar and the nation's right to exercise economic sanctions on other countries. Cryptocurrencies are a concern because they essentially take the United States' economic authority and distribute it to no one in particular.
What would happen in a world where cryptocurrencies are widely utilized and no country fears US sanctions? In 2019, Harvard University's Kennedy School performed a simulation in which the usage of digital yuan enabled North Korea to test its nuclear missile program with the assistance of China.
The simulation predicts a world in which other countries can defy the US at will as a result of successful circumvention of its sanctions via cryptocurrencies. According to all indications, the usage of cryptocurrencies will alter global trade by creating a market unlike any other.
Countries and enterprises will be able to trade more freely, even with world powers such as the United States. This amount of autonomy and power that cryptocurrency may provide governments will render it absolutely irreplaceable and priceless on the global arena, ensuring its continued use by countries for decades to come. Needless to say, the full impact of this will be felt in international diplomacy as well as global trade and commerce.