By Jose Miguel Alonso-Trabanco
Much has been said about the problematic implications of cybercurrencies like Bitcoin for contemporary security environments. After all, they provide unsupervised conduits for the cross-border circulation of money in ways that can conceal the identities of those responsible. Needless to say, such advantage can be useful for the various financial operations of malicious nonstate actors, such as transnational criminal organizations, terrorist networks, insurgent militias, hacktivists, and even separatist forces.
Unsurprisingly, evidence confirms that the cryptocurrency ecosystem has attracted the involvement of unsavory groups like ISIS, Hamas, Mexican drug cartels, cybercrime syndicates, and professional money launderers. Plus, as the case of the so-called ‘Silk Road’ illustrates, Bitcoin has become the coin of the realm in the illicit markets which flourish in the deepest corners of the digital lawless underworld known as the ‘dark web.’ Likewise, the esoteric realm of cryptocurrencies is seemingly fertile for all sorts of criminal activities, intrigues, fraudulent businesses, scandals, conspiracy theories, scams, make-believe, and wild unconfirmed rumors. Arguably, this emerging microcosm reflects some of the dark traits associated with human nature since the dawn of time, including greed, the pursuit of power, and deception. However, the instrumental implications of Bitcoin for the practice of statecraft have not been fully understood in a comprehensive manner. Thus, this analysis seeks to clarify in-depth the relevance of Bitcoin for national power and, specifically, to determine how and why it can either strengthen or weaken it in today’s increasingly complex strategic geopolitical realities and geoeconomic dynamics.
Background: What is Bitcoin?
As the first of its kind, the creation of Bitcoin (BTC) is a major evolutionary turning point in the historical development of money. This cryptocurrency was born in a period shaped by the changing Zeitgeist in the wake of the 2008 global systemic financial crisis, particularly growing public concern and discontent over the implementation of unsound monetary policies (i.e. rampant levels of quantitative easing), the oligopolistic structure of Western financial systems, the questionable legitimacy of fiat money, deepening spirals of debt, the reliability of the US dollar as a reserve currency, and the unchecked market power of big banks. Its precedents include the development of electronic payment systems, the proliferation of digital FinTech innovations, and theoretical proposals to formulate virtual equivalents of cash that could be used to carry out anonymous transactions. The invention of Bitcoin was masterminded by someone called Satoshi Nakamoto. However, the consensus indicates that said name is an alias adopted by an individual or a group that wishes to remain anonymous for unclear reasons.
The uniqueness of this cybercurrency is defined by several characteristics. Bitcoin’s governance structure is stateless, unofficial, and decentralized. In practical terms, that means that the BTC environment ‒ which encompasses an integrated financial grid ‒ is not controlled by hierarchical governmental or corporate nerve centers. Instead, the behavior of its organic ecosystem responds to the authority of algorithmic programming. Therefore, unlike fiat money (issued by governments and flowing through arteries owned by private baking entities), nobody is in charge of Bitcoin. Hence, it purports to replace the socio-economic need for mutual trust and faith in the money issued by central banks with an impersonal mathematical accuracy that resembles the automatic perpetual motion of a clockwork mechanism. The design of this singular architecture is underwritten by a couple of ideological frameworks: 1) libertarianism, a philosophical school of thought that seeks to diminish the presence of the state in the sphere of economic matters as much as possible; and 2) techno-utopianism, a movement which believes that high-tech can offer functional solutions for every conceivable societal problem.
Moreover, Bitcoin’s technical properties are also noteworthy. Access to its operational interfaces (wallets) is protected by cryptographic keys and its technological engine is the automatic bookkeeping system known as ‘blockchain,’ identified as one of the chief drivers of the so-called “Fourth Industrial Revolution.” A blockchain is a collective and self-sustaining digital systemic record that is periodically updated in a way that makes it inalterable. In addition, as a horizontal and leaderless domain, the Bitcoin community gathers its users and holders through a peer-to-peer protocol. Furthermore, although it does not provide full anonymity, BTC facilitates pseudonymous transactions. In other words, people involved in BTC can ‒to a certain extent‒ hide their identities and protect their personal privacy in a manner that would not be possible through the services offered by conventional third-party platforms.
On the other hand, the process through which new Bitcoin units are minted does not involve either printing legal tender or fractional reserve banking. Known as ‘mining,’ it entails the performance of mathematical operations to solve increasingly complex puzzles as a step that is necessary for the collective validation of transactions (‘proof of work’). Once the equation has been deciphered by one of the advanced computers connected to the Bitcoin network, the winner is rewarded with new Bitcoins. The quest to harvest this incentive is what keeps the whole thing going. In other words, BTC mining includes both collaborative and competitive ingredients. Cryptocurrency mining requires elements such as state-of-the-art hardware with powerful computational capabilities and an abundant source of electricity. Accordingly, this flourishing industry is intensive in terms of both technological resources and energy. As some observers have noted, the artificial difficulty of the process is supposed to mimic the hard effort that is needed to extract precious metals such as gold and silver, both of which have acted as universal monetary substances for centuries due to their natural scarcity, intrinsic value, aesthetic beauty, and reputational prestige. Hence, it has been argued that BTC embodies the conceptual model of ‘digital metallism.’
There are unsettled debates in the rising intellectual and academic universe of ‘cryptonomics.’ Some analysts claim that, not unlike fiat money, Bitcoin has no intrinsic worth. According to this interpretative perspective, Bitcoin acts a lot like a virtual speculative asset whose value is determined by the behavior of market forces and the accompanying expectations to make a quick profit. In contrast, others believe that Bitcoin is tacitly backed by the work that is needed to ensure its survival and its large consumption of energy, as well as by the underlying support of material components which undergird its circuitry, such as servers, internet infrastructure, specialized computers, chips, graphics cards, power grids and so on. In other words, despite being a purely virtual currency, the existence of BTC goes beyond the dimension of digital code thanks to the various pillars which anchor it to physical reality.
On the other hand, scholars like Saifadean Ammous and Niall Ferguson emphasize Bitcoin’s peculiar traits and the potential shockwaves of this disruptive FinTech invention. These thinkers argue that Bitcoin’s long-range significance goes much further, as it heralds nothing less than a revolution that represents a new ground-breaking chapter in the long-range historical trajectory of money, after decades of constant debasement. This idea of Bitcoin as a visionary innovation that will redefine the world’s monetary standards is seemingly supported by the influence of this cybercurrency in the creation of a constellation of hundreds of spin-offs and offshoots. Likewise, the introduction of BTC was a pivotal breakthrough that prompted the subsequent development of both ‘stablecoins’ launched by private companies and Central Bank Digital Currencies (CBDCs).
Finally, the Bitcoin universe is remarkably plural. It contains a heterogenous myriad of inhabitants, participants and stakeholders. Some of its early adopters were tech-savvy enthusiasts, libertarian activists, dissidents living under political repression, outlaws, start-up innovators, speculative traders, scholars, cryptographic experts, and cyber-anarchists, amongst others. However, the circulation of BTC is no longer a marginal phenomenon confined to some obscure niches reserved for an elite of intrepid merchants and enlightened initiates who share some sort of arcane knowledge. By now, its projection has become substantially wider as it has drawn the attention and active involvement of corporate heavyweights, mainstream digital platforms, investment banks, traditional financial firms, policymakers, regulatory authorities, law enforcement, ordinary investors and even curious members of the general public. In order to keep things in perspective, it is pertinent to highlight that Bitcoin’s market cap is already superior to the GDP of countries like Chile, Portugal and New Zealand.
In theory, the mere existence of a nonstate cybercurrency like Bitcoin challenges one of the most emblematic hallmarks of the modern Westphalian conception of national sovereignty: the monopoly of states as the only issuers of legal tender within their territorial perimeter. However, this is not just a symbolic attribution. Monetary policy is a tool that states use to direct the performance of their economies, influence their international economic exchanges, and manage their governmental expenses. Thus, the circulation of decentralized unofficial cryptocurrencies can hypothetically jeopardize said ability by displacing conventional currencies issued by central banks. Furthermore, unlike hard currencies, BTC is not backed by the national strength of any great power, or any other state for that matter.
Nevertheless, those realities do not mean that Bitcoin is necessarily always detrimental for national power or inconsequential for it. In fact ‒ Inspired by the analytical lens of strategic foresight ‒ several potential opportunities to harness Bitcoin as an instrumental tool of states to pursue their national interests have been identified. First, special operations units and intelligence services can rely on Bitcoin’s discreet financial channels as users in order to fund clandestine activities, reward agents and informants, make purchases of illicit items in black markets, carry out all sorts of undisclosed payments, and even bankroll agitation in foreign countries as a way to instigate instability. Likewise, Bitcoin represents a catalyst for the development of better capabilities in terms of financial intelligence (FININT). Specifically, a better understanding of the BTC operational environment would enhance the ability of intelligence agencies and law enforcement to track transactions denominated in cryptocurrencies and discover the real-life identities of the corresponding users. This upgrade would increase the coercive power of states to disrupt the alternative financial conduits employed by their enemies, including nonstate actors and hostile states regarded as strategic competitors. In fact, such course of action has even been endorsed by former high-ranking CIA officials.
On the other hand, states can also engage the world of unofficial cryptocurrencies like BTC in a beneficial way through the encouragement of mining as a productive activity on a large scale. This undertaking can bring wealth, bolster economic dynamism, and support technological development. Nevertheless, the successful implementation of this option requires a systematic industrial policy and economies of scale, as well as comparative advantages related to the availability of affordable electricity and access to sophisticated equipment. Moreover, due to the wild fluctuations of Bitcoin’s exchange rates, this pursuit would face the typical challenges associated with the extraction of commodities whose market prices are highly volatile. Yet, as long as favorable circumstances prevail, this unconventional industry can represent an option worth considering to increase prosperity when participation in more traditional options is difficult or if there are obstacles which hamper the ability to make profits through international economic exchanges.
Finally, an even more counterintuitive possibility is the accumulation of BTC holdings in order to diversify a country’s foreign exchange reserves. For example, Indian analyst Ashwath Komath argues that said recommendation makes sense for the national interests of states which seek to adopt a nonaligned foreign policy orientation, a distinctive trait of Indian statecraft for decades. Unlike assets denominated in fiat currencies, BTC cannot be frozen, sanctioned, or confiscated in case conflict breaks out. Likewise, adding this cybercurrency to a state’s coffers would also prevent overreliance on foreign financial systems and strengthen Delhi’s position towards both the West and China, the major players in the ongoing strategic competition to shape the architecture of the global monetary order in the coming decades. Furthermore, a country like India could be uniquely positioned to embrace Bitcoin as a secondary reserve currency, especially considering its growing participation in the field of high-tech innovations.
Nonetheless, there are reasons why decentralized cryptocurrencies like Bitcoin could be potentially harmful for national power. Since their value fluctuates so drastically, they are vulnerable to speculative attacks, which could be motivated by economic and political agendas. Furthermore, the incremental progress of quantum computing can compromise their protective cryptographic shields. Plus, if their internal circulation reaches substantial proportions, then they can marginalize the national currency, which would entail the partial degradation of monetary sovereignty. Furthermore, powerful rival states can seek to establish a dominant high ground in the environment of a cybercurrency with a considerable degree of international projection in a quest to harness the resulting asymmetric leverage vis-à-vis other states whose position there is comparatively weaker. Another detrimental consequence of embracing decentralized virtual currencies is the exposure to the potential backlash of the states which control the top reserve currencies. In other words, there is no guarantee that Bitcoin and its derivatives will necessarily boost national power. Thus, under certain conditions, relying on them can backfire.
Aside from exploratory forecasts, there are already several empirical examples which demonstrate how states are adjusting in the monetary realm based on their expectations about how said currencies might reinforce or damage national power.
Perhaps the most paradigmatic example is El Salvador. Back in 2021, this Central American country became the first national state to formally accept BTC as fully legal tender in an ambitious experimental attempt to merge its economy with the ecosystem of such cybercurrency. The purpose of this fateful decision responded to economic interests, such as the desire to upgrade the profile of the Salvadorean economy, boost the flow of remittances from overseas, position itself as regional hub for crypto mining as a source of wealth, and correct financial imbalances. Nevertheless, this measure was not just about the pursuit of prosperity. Considering the background of El Salvador as a peripheral theatre for proxy wars during the late Cold War, BTC can ‒ as an asset that represents a strategic vector ‒ help this small nation navigate independently under an intense strategic competition between Washington and Beijing (a rivalry whose fallout is felt in the sphere of money and finance) without having to take sides. The recent decline of Bitcoin’s value raises reasonable doubts about the wisdom of this decision, but only time will tell if the benefits outweigh the costs.
On the other hand, it is known that entities affiliated with the US state establishment ‒ including the foreign policy complex, intelligence agencies, and think tanks involved in strategic studies ‒ are actively interested in surveillance of the Bitcoin ecosystem because it can be exploited by nonstate and state actors regarded by the US as enemies. For example, the revelations shared by whistle-blower Edward Snowden indicate that the NSA has been intensively trying to find ways to uncover the identities of users who belong to the BTC community through measures like cyberespionage, technical interference, and even the design of misleading crypto platforms that have no intention to protect the privacy of their members. Years later, the current CIA Director William Burns openly admitted (in the context of a public event) that the agency under his leadership is running several projects focused on cybercurrencies, though no precise details were disclosed.
Furthermore, another case worth considering is the Russian Federation. This Eurasian state was at first reluctant to embrace cryptocurrencies like Bitcoin but then it reassessed its position after it realized that crypto represented certain opportunities. Thereafter, Moscow has nourished the development of a domestic industry involved in Bitcoin mining in the Russian Far East. It must be noted that Siberia offers the comparative advantages to do so on a large scale, including the availability of hydropower as a generous source of cheap electricity, infrastructure that supports an optimal internet connectivity, permissive regulatory frameworks, and a cold weather that mitigates the excessive heat that is generated as a by-product of this activity. Moreover, the imposition of Western sanctions after the takeover of Crimea has encouraged the Kremlin to double down in this pursuit, as it generates wealth which does not flow through financial arteries controlled by hostile states and furthers technological progress. It is important to emphasize that, for Russia, access to international finance and cutting-edge technologies is a national security priority because, without those elements, the national power of the Russian state would be substantially reduced in the near future. Perhaps not surprisingly, after the 2022 invasion of Ukraine, Moscow has reportedly been examining the pertinence of accepting payments denominated in cryptocurrency in order to counter the ongoing efforts to restrict its exports of energy, including both oil and natural gas.
In contrast, the case of the China points in a very different direction. Initially, the Middle Kingdom was one of the enthusiastic early adopters of Bitcoin and similar cryptocurrencies. At some point, China was by far the undisputed global leader of mining operations. Nevertheless, Beijing moved towards a diametrically different position as it implemented a series of increasingly draconian restrictions, including the shutdown of mainland cryptocurrency exchanges, heavy-handed measures of technical interference, the closure of BTC mining facilities and even mass arrests of Bitcoin users. It is believed that this course of action responded to the need of preventing capital flight and undermining an activity which could have posed meaningful challenges for the energy security of the Chinese state. However, another possible motivation was likely an interest in casting aside a potential source of unwanted competition for the release of the e-CNY, the official currency designed by the People’s Bank of China as a digital version of the national legal tender. It is unknown if this was the plan all along, but it is suggestive that the idea of aggrandizing the proportions of something in order to get rid of it afterwards (the so-called ‘principle of reversal’) is consistent with the prescriptions found in classical Chinese strategic thinking.
Far from being neutral, Bitcoin entails significant ramifications for national power, understood as the combined ability of states to further their interests through their resources, assets, and capabilities. Just like any other invention, said cybercurrency is an instrumental item that can be harnessed, leveraged, exploited, and/or manipulated in the practice of statecraft. As such, it can offer strategic, diplomatic, economic and technological benefits worth harvesting. Nevertheless, though there is no single recipe to engage this FinTech innovation, exploratory forecasts and the scrutiny of empirical developments indicate that it can be employed as a tool to carry out black ops, a catalyst for the optimization of financial intelligence, a facilitator of industrial development, a source of national wealth, an alternative reserve currency, and even an unconventional vector of grand strategy which can enable the performance of balancing acts. Needless to say, such attributes make it attractive under conditions of heightened geopolitical and geoeconomic tensions. However, as double-edged sword, Bitcoin can also be detrimental for national power in some circumstances. Paraphrasing a sharp observation made by Joseph de la Vega about the contradictory nature of high finance in 17th century Amsterdam in his legendary treatise “Confusion of Confusions,” the paradoxical ambivalence of BTC is that can be both a treasure of usefulness for the intrepid and ‒ at the same time‒ a treacherous road that leads to the downfall of the unwise.
Thus Article was originally published on December 17, 2022 in the geopoliticalmonitor.com
Promoting Financial Inclusion for Female-Managed SMEs Through Blockchain Technology
By Tuhu Nugraha and Temmy Debora*
In the midst of the rapid digital era, blockchain technology emerges as an innovation with the potential to revolutionize the global financial industry. In Indonesia, SMEs managed by women stand as one of the sectors that can reap significant benefits from this technology. SMEs play a crucial role in the national economy, with over 64.2 million business units contributing 61.9% to the GDP and employing up to 97% of the workforce.
However, many SMEs face challenges, ranging from access to financing to marketing issues and productivity. With the government’s financial inclusion target set at 90% for 2024, the role of SMEs, especially those managed by women (which account for 64.5% of all SMEs), becomes pivotal. Therefore, promoting financial inclusion for female entrepreneurs has a strategic impact in achieving this target.
Here’s how blockchain can be a solution to enhance financial inclusion for female SME entrepreneurs in Indonesia:
Access to Financing
Based on data from the Ministry of Communication and Information, only 20 million out of 64 million SMEs have accessed formal financial institutions. One of the main reasons many SMEs, especially those managed by women, struggle to access formal financial institutions is due to stringent requirements. Many SMEs lack formal documents like audited financial statements, physical collateral, or a good credit history. Moreover, the lengthy and bureaucratic loan application process often becomes a barrier for SMEs to obtain working capital.
Blockchain technology offers a financial inclusion solution for female-managed SMEs in Indonesia, often hindered by strict requirements and lengthy processes in formal financial institutions. With a blockchain-based lending platform, female-managed SMEs can access financing with a simpler, transparent, and efficient process. Direct interaction between lenders and borrowers reduces transaction costs, while blockchain transparency enhances trust. Additionally, an alternative credit assessment model based on SME transaction data allows those without a formal credit history to still obtain financing.
Low Transaction Costs
Transaction costs play a significant role in SME operations. For many SMEs, especially those transacting in small amounts, high transaction costs can significantly erode profit margins. This becomes even more critical for female-managed SMEs who might have limited initial capital and smaller operations compared to other SMEs.
Blockchain technology offers a solution to reduce these transaction costs. With its decentralized nature, blockchain eliminates the need for intermediaries like banks or other financial institutions. This means that fees typically charged by intermediaries – such as administrative fees, transfer fees, or other charges – can be eliminated or drastically reduced.
When compared to the interest rates currently borne by SMEs from loan sharks, the difference becomes stark. Loan sharks typically offer loans with very high-interest rates, sometimes reaching 20% to 40% per month. This is much higher compared to interest rates from formal financial institutions. With blockchain, female-managed SMEs can not only reduce transaction costs but also potentially access financing at lower interest rates through blockchain-based peer-to-peer lending platforms.
Thus, adopting blockchain technology can provide dual benefits for female-managed SMEs: reducing transaction costs and providing access to cheaper financing, thereby enhancing their profit margins and competitiveness in the market.
In the midst of globalization, female-managed SMEs in Indonesia find opportunities to penetrate international markets. However, a disparity is evident: although SME exporters account for 77.28% or about 13,775 exporters, their contribution is only 4.09% or 6.331 million USD of total exports. In contrast, large-scale exporters, which only account for 22.72% or 4,044 exporters, dominate with a contribution of 95.9% or 148.609.7 million USD, as stated by the Director of Export Market Development of the Ministry of Trade in 2023. One of the main challenges faced by female-managed SMEs is cross-border transactions. Many of them find it difficult to access international payment platforms, such as PayPal, due to language barriers and complex administrative requirements. High transaction fees and long settlement times through conventional banks add to their burden. As a solution, blockchain technology and cryptocurrencies emerge, offering simpler transactions, lower fees, and higher security. With an interface that supports the Indonesian language and without the need for a conventional bank account, female-managed SMEs now have a greater opportunity to compete more effectively on the international stage.
Female-managed SMEs, especially in remote areas, often face challenges in accessing financial services such as loans or insurance. One of their main obstacles is the lack of formal identity documents, such as national ID cards, family cards, or proof of land ownership, typically required by banks or other financial institutions. Without these documents, they are often marginalized from the formal financial system. However, blockchain technology offers an innovative solution to this problem. Imagine blockchain as a secure digital ledger, where every piece of information entered cannot be altered or deleted. With this technology, female-managed SMEs can have a “digital identity” registered on the blockchain. This identity can contain basic information such as name, address, business transaction history, and more. Most importantly, this identity is secure and verified. By having a blockchain-based digital identity, female-managed SMEs in remote areas can demonstrate to financial institutions that they are legitimate and trustworthy business entities. This makes it easier for them to apply for loans, open bank accounts, or access other financial services that were previously hard to reach. In other words, blockchain provides an opportunity for female-managed SMEs to integrate into the formal economy, enhancing their business growth potential.
Blockchain provides innovative solutions for female-managed SMEs in Indonesia, especially in remote areas. There, they often face various challenges, from inadequate education, limited capital, to a lack of supporting infrastructure. But why focus on female-managed SMEs? Because in many cases, these women are the main pillars of the family. They play a crucial role in efforts to break the chain of poverty, hoping to provide better education for future generations. With the help of blockchain technology, financial inclusion can be expanded, social disparities can be reduced, and opportunities for female-managed SMEs to improve their families’ quality of life become even greater.
Tuhu NugrahaTuhu Nugraha is a Digital Business & Metaverse Expert Principal of Indonesia Applied Economy & Regulatory Network (IADERN)
Temmy Debora, is the CEO and Founder Nakama.id, & Web3 Trailblazer Indonesia
Courtesy: Modern Diplomacy
Istanbul Blockchain Week Spotlights Islamic Finance and Web3 Innovations
Strategically nestled between Dubai and London, Istanbul is emerging as Turkey’s financial nerve center, pulling global events and organizations into its vibrant orbit. Its unique geographic position offers event planners a canvas to meld Eastern and Western cultural nuances seamlessly, a feature that was palpably felt at Istanbul Blockchain Week 2023.
Spanning two eventful days in August at the Hilton Istanbul Bomonti, IBW 2023 buzzed with a confluence of blockchain enthusiasts, both local and global. The itinerary was chiseled to encapsulate the multifaceted Web3 landscape, spotlighting topics ranging from the interfaces between artificial intelligence (AI) and blockchain to real-world applications of this groundbreaking technology.
Notably, IBW 2023 mirrored the broader narrative of the crypto ecosystem in the Middle East, particularly the burgeoning Web3 and crypto sector in the UAE. Region-centric discussions, such as Islamic finance’s synergy with a Shariah-compliant Web3 milieu, underlined the event’s relevance. The rapid proliferation of these sectors in places like Dubai and the UAE’s burgeoning interest in the Turkish market set the stage for EAK Digital’s timely decision to host the event, especially with the summer heat making Dubai a less appealing venue. Erhan Korhaliller, the visionary behind EAK Digital, elucidated this strategic move, emphasizing Istanbul’s appeal as an international fulcrum for the UAE’s major stakeholders.
One cannot overlook the sheer scale and diversity of the gathering. From government officials to influential financial institutions, the convergence was impressive. The venue teemed with blockchain aficionados, workshops, roundtable dialogues, and even a futuristic touch with participants getting scanned for metaverse entry. Not to mention the engaging interactions with Desi, the AI conversationalist developed by SingularityNET and Yaya Labs.
Yet, in a marked departure from the previous year, nonfungible tokens (NFTs) found limited representation. With a notable downtrend in NFT trading, organizers leaned into market feedback. Korhaliller noted the adaptability required, stating the clear lack of interest in NFTs this year.
Parallelly, the event witnessed spirited engagements around Islamic finance. As industry experts unraveled the intricacies of this ancient financial system, a cohort of budding developers was engrossed in the IstanHack hackathon, crafting innovative solutions that harmonized with the event’s overarching theme of ethical finance.
AI dominated many conversations, both within and outside the main hall. Loic Claveau of SingularityNET weighed in on the democratization of data, stressing the profound potential of decentralized AI on the blockchain. He painted a vivid picture of AI’s voracious appetite for data and the monopoly of tech giants in the field.
Istanbul’s growing role in the crypto sphere also saw reflections in the words of Eray Dengiz, CEO of Cointelegraph Turkey. With prominent Turkish banks actively participating and discussions centering on the future of finance, the city’s positioning as a financial hub was evident. Addy Crezee, the founder of NFT ticketing platform Ozaru, encapsulated the phenomenal growth of the crypto world, recalling the modest gatherings of yesteryears and contrasting them with today’s expansive events.
In conclusion, Istanbul’s Blockchain Week 2023 wasn’t merely an event—it was a testament to the city’s burgeoning role in shaping the future of finance and technology.
BRICS and the Evolution of Global Finance: Why Blockchain Payment Systems Are the Way Forward Part 1
Could the financial evolution of the powerhouse BRICS nations signal a new era in global economics? As these nations stand at a crossroads, the answer might lie in blockchain. Before diving into the transformative potential of blockchain for BRICS, it’s essential to understand the group’s historical foundation. Originating from the acronym coined by Goldman Sachs in 2001, BRICS signifies the emerging economies poised to rival the G7 nations. Over the years, these countries have evolved from mere market predictions to a cohesive group, showcasing combined economic prowess and geopolitical influence. Knowing their storied past will provide a clearer perspective on why their future steps, particularly in the realm of blockchain and financial technology, could be so impactful globally.
The BRICS consortium, comprising Brazil, Russia, India, China, and South Africa, signifies a potent economic force on the global stage. They contribute immensely to global economic growth, boasting significant foreign reserves. Blessed with abundant natural resources, combined populations that sum up to over 40% of the global populace, and a shared vision for multilateral cooperation, BRICS plays a pivotal role in international geopolitical and economic dynamics. Their presence not only signifies a shift in economic power but also epitomizes how cultural and historical diversities can converge for a shared global goal.
Through BRICS, member nations have augmented cooperation across various domains, including finance, trade, and development. A testament to this cooperation is the establishment of the New Development Bank (NDB) aimed at financing infrastructure projects in developing countries. Recent reports indicate that 44 nations have expressed interest in joining BRICS, especially with the upcoming summit in Johannesburg, South Africa, from August 22-24, 2023. The meeting’s focal agenda is the potential expansion of the bloc to counterbalance Western hegemony led by the United States. According to Goldman Sachs, by 2050, the combined economy of BRICS nations will emerge as a new global power.
Amid the rapid global financial evolution, BRICS nations find themselves at a strategic crossroads: Should they introduce a joint digital currency or devise a cross-national payment system harnessing blockchain and crypto technology? While both options seem promising, the scales tilt in favor of a blockchain-based payment system, and here’s why:
Economic & Policy Uniformity: A unified digital currency demands cohesive economic and monetary policies amongst BRICS nations. Given the considerable disparities in their economies and monetary policies, reaching a consensus will be challenging.
Technological Infrastructure: Deploying blockchain and crypto proves more straightforward than introducing a new digital currency. BRICS nations, having delved into this tech, can leverage it to craft a more efficient payment framework.
Adoption & Integration: Blockchain-based payment systems can seamlessly integrate with existing financial infrastructures, ensuring smoother and quicker market acceptance. As a potential alternative to the global SWIFT standard, blockchain offers benefits like speed, transparency, lower costs, and enhanced security through encryption and decentralization.
Autonomy & Independence: By adopting a blockchain-based system, BRICS nations can maintain monetary policy autonomy while benefiting from shared technology prowess.
Security & Transparency: Blockchain’s hallmark is its transparency and security. A blockchain-based cross-border payment system ensures verifiable transactions, amplifying trust and minimizing fraud risks.
External Pressure Resilience: With a blockchain payment system, BRICS nations can lessen their reliance on global currencies like the US Dollar, fortifying their economic resilience against external pressures.
Smoother Transition: Launching a new currency potentially opens a conflict with the Western-dominated global order. Given the simmering tensions due to China’s rise, post-Covid-19 economic recovery, and the Russia-Ukraine conflict, a blockchain-based alternative payment system offers a middle ground that doesn’t directly challenge the West. It’s seen more as economic pragmatism, likely garnering support from neutral nations.
In conclusion, the allure of a unified BRICS digital currency cannot be denied, but the intricate economic and political landscapes of its member countries point towards a blockchain and crypto-based international payment system as a more pragmatic choice. This innovation would not only bolster BRICS’s position on the global stage but also offer them greater autonomy over their financial destiny. Given the significant geopolitical shifts such decisions could precipitate, a deeper exploration into the global power dynamics and diplomatic consequences is imperative. This insight will provide a clearer perspective on the broader ramifications BRICS’s actions might have, especially when contending with well-established Western financial frameworks.
Digital Business & Metaverse Expert Principal of Indonesia Applied Economy & Regulatory Network (IADERN)
Courtesy: Modern Diplomacy
A Human Tragedy in Libya Brought about by Intense Flooding and Political Chaos; Death toll Could Reach 20,000
Morocco’s Earthquake Wasn’t Unexpected – Building Codes Must Plan for Them
President Hassan is the Face of Tanzania’s reform agenda. But she Needs to Carry the Country with Her
AFRIEF Congratulates New Zamfara State Governor
IPCC report: ‘Code red’ for human driven global heating
A Salutary Tribute to General Ibrahim Badamasi Babangida: Architect of Islamic Finance in Nigeria
- AGRIBUSINESS & AGRICULTURE
- BUSINESS & ECONOMY
- DIGITAL ECONOMY & TECHNOLOGY
- EVENTS & ANNOUNCEMENTS
- HALAL ECONOMY
- HEALTH & EDUCATION
- IN CASE YOU MISSED IT
- INTERNATIONAL POLITICS
- ISLAMIC FINANCE & CAPITAL MARKETS
- KNOWLEDGE CENTRE, CULTURE & INTERVIEWS
- SPECIAL FEATURES/ECONOMIC FOOTPRINTS
- SPECIAL REPORTS
- SUSTAINABILITY & CLIMATE CHANGE
- THIS WEEK'S TOP STORIES
- UNITED NATIONS SDGS
TRENDING4 months ago
AFRIEF Congratulates New Zamfara State Governor
BUSINESS & ECONOMY2 years ago
IPCC report: ‘Code red’ for human driven global heating
PROFILE1 month ago
A Salutary Tribute to General Ibrahim Badamasi Babangida: Architect of Islamic Finance in Nigeria
BUSINESS & ECONOMY2 years ago
The Black sea protection initiative: What should we remember?
BUSINESS & ECONOMY2 years ago
Climate Policy In Indonesia: An Unending Progress For The Future Generation
BUSINESS & ECONOMY2 years ago
The Climate Crisis is Now ‘Code Red’: We Can’t Afford to Wait Any Longer
BUSINESS & ECONOMY2 years ago
The Only Way to Stop Global Warming
HEALTH & EDUCATION2 years ago
Recent Studies Show Moderna to Be the More Effective One