Opinion: Portrait of a Digital Currency World

Imagining a Borderless Global Economy
By 
Coin Cloud Team
, published on 
May 8, 2020
Opinion: Portrait of a Digital Currency World

I believe the traditional financial system needs a total facelift. If not now, then sometime very soon.

Based on central reserve banks and liquid stocks, the current system isolated a significant portion of the global population … even before COVID-19 entered our collective world.

An economy that relies on the foreign exchange rate of the dollar puts international markets at risk of volatility and instability. If one of the critical stakeholders fails to uphold the system, we can easily topple into a recession. That ground is way too shaky to sustain a scalable global economy.

In the case of fluctuating political scenarios, natural disasters, pandemics (ahem!) or other such unforeseeable events, the dollar-backed global financial system teeters on the fine line between stability and complete decimation. We’ve experienced elements of that, globally, during the COVID-19 pandemic.

This includes exchange rate instability, panic buying/selling of stocks, and mass retreats to safe-haven investments. Then the “trickle-down effect” starts to negatively impact the cost of services, amenities, and products around the world.

An Elegant Solution?

Humor me for a minute. Imagine if we were to create a global currency exchange system that was…

● Not reliant on the dollar

● Immune to exchange rate fluctuations

● Unaffected by global travesties

● Free from political control

That scenario would feature easy, fast, and free transactions across international borders. And it would probably be based on digital funds … like cryptocurrency.

What kind of a world would this borderless financial system create? The list can go on and on, but let’s look at a couple of scenarios.

A Low-Risk Economy

I think the most substantial benefit of a global cryptocurrency-backed financial system would be the complete (or at least partial) reduction of “risk”.

What does this lead to? More investment of capital, instead of the current model of stockpiling cash in the form of savings and funds. As money is funneled directly into the economy, instead of being wiped off the fiscal map for “rainy days,” we in turn enjoy a steep decrease of global debt.

With significantly less debt, more investment of capital and greater assurance of stability, the financial atmosphere could quickly turn in a very different direction. This could mean a higher focus on internal investments for development, rather than just looking to the external foreign exchange.

Safe Investments

By default, investments would become inherently safer and more secure because the risk of fluctuating foreign exchange rates, impacting the initial capital, would be eliminated. An intermediary would be required to act as a guarantor of trust between two transacting parties. In this scenario, central banks would take on a modern purpose as the “guarantors” of transactions.

Conclusion

It’s important to note that even without transactions being tied to foreign exchange rates and the price of the dollar, there’s still room for central banks to serve as guarantors of digital payments.

Unfortunately, the global community is light years away from giving a genuinely decentralized system a chance.

But as we see greater worldwide adoption of cryptocurrencies and the development of more practical models, we can no doubt look forward to a more stable international economic system in the future. All it will take is a simple switch to a cryptocurrency-backed economy.

Disclaimer: The information and views supplied on the Coin Cloud blog are for educational and entertainment purposes only. We are not financial advisors, so please do your research and consult with a trusted financial specialist before investing your money.

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