While financial institutions explore the capabilities of the block chain as a tool for managing finance, the supply chain industry is taking an interest in using bitcoin and the block chain for managing global trade and e-commerce.
Rimas Kapeskas, managing director of UPS Strategic Enterprise Fund, the private equity strategic investment arm of UPS, wrote a blog about the advantages of bitcoin on Longitudes, the UPS blog devoted to the trends shaping the global economy. Kapeskas said digital currency and block chain technologies could provide a better platform for global trade and e-commerce than the current clearing and settlement systems that are costly and inefficient.
The blog is titled “Does Global Trade Need A (Bitcoin) Global Currency?” and has drawn a lot of comments in the supply chain industry.
“The rise of e-commerce has empowered consumers and changed the landscape for buying and selling goods, while transforming the worldwide economy,” Kapeskas wrote. “This omnipresent demand for goods, regardless of the market, will soon get even more intense.”
The current payment, clearing and settlement systems are inefficient, have long settlement times and high-cost fees and exchange rates. Calculating fair exchange rates and the fees required is hard when the variables are unknown, as is often the case under the current system. Regulations and currency rates vary by country, and not all merchants can manage the current level of complexity online.
Today’s technologies have enhanced the global exchange of information about goods and bolstered transportation networks moving items across borders.
Even regional currencies like the Euro struggle to keep national economies in order, Kapeskas wrote. New payment platforms are fostering a globally accepted exchange mechanism that would not require a unified monetary system. Here is where virtual currency comes into play. Digital money can move across borders without requiring multiple intermediaries and currency swaps.
Of digital currency, he noted the following: “If recognized, its value is the same regardless of where you do business, eliminating friction points and facilitating the faster flow of goods.”
Digital currency also allows consumers and businesses of all sizes to participate in e-commerce. The movement of goods, funds and information must be both secure and seamless for e-commerce to thrive.
Virtual currency seems like a logical next step, one that could bring markets closer together and facilitate faster trade.
The advances that most effectively eliminate barriers and make commerce easier are usually the ones that stand the test of time. This is why global trade is ready for a global exchange system that enables seamless transactions.
Also read: Huge Global E-Commerce Company Rakuten Rolls Out Bitcoin Acceptance
Kapeskas’ blog drew a lot of comments on the UPS Longitudes website. Supplychain247, a supply chain news portal, ran Kapeskas’ blog and posted an audiobook of the original bitcoin white paper by Satoshi Nakamoto.
Pymts.com, a payments industry website, took note of the extensive comments and asked Kapeskas to expand on his comments. In this interview, Kapeskas explained the need for business-to-business (B2B) commerce to utilize block chain technology. He noted block chain technology can manage “smart contracts” and cross-border processing.
Kapeskas also noted that block chain technology could bring visibility to the B2B system, especially in the areas of identity management and authentication. Some of the world’s biggest companies are starting to understand that the block chain technology can be used for many types of international transactions, including paying vendors and payroll processing.
Featured image from 360b / Shutterstock.