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Does Global Trade Need A (Bitcoin) Global Currency?

By Rimas Kapeskas / / September 22nd, 2015


The logistics industry is seriously talking about a virtual currency like Bitcoin, which could open up an array of new markets, while speeding the worldwide exchange of goods.

Our world is getting smaller, flatter and more connected every day.

The rise of e-commerce has empowered consumers and changed the landscape for buying and selling goods, while transforming the worldwide economy.

This omnipresent demand for goods, regardless of the market, will soon get even more intense.

However, the current payment, clearing and settlement systems are major bottlenecks to the flow of global trade.

They are inefficient, have long settlement times and high-cost fees and exchange rates.

Today’s technologies have enhanced the global exchange of information about goods and bolstered transportation networks moving items across borders.

People around the globe have access to virtual marketplaces that feel borderless.

But consumers are still stuck in the credit card age of payments for those transactions.

Sure, credit cards have been around for 65-plus years. But they are ripe for a technological leap.

Read: Bitcoin Currency Explained

Logistics And Bitcoin: A Match Made For Global Trade?
Managing Director of the UPS Strategic Enterprise Fund Rimas Kapeskas published the blog post above on Longitudes, the official UPS blog, that really got the logistics industry talking.

Kapeskas asked, “Does Global Trade Need A Global Currency?” And it started a conversation about the potential for bitcoin and blockchain technology to ease friction for the logistics and payments players that make cross-border trade possible.

It was a provocative piece that led PYMNTS to speak further about the idea with Kapeskas. Read what he told us about his vision for the future of the cryptocurrency in cross-border and B2B trade, and how logistics giant UPS could step in to lead the charge.

PYMNTS: In your recent blog post, you discuss consumers’ continuing use of inefficient payment methods when it comes to cross-border trade and eCommerce. But many of the statements you make in your post can also be applied to B2B commerce – some argue that businesses similarly use inefficient and slow methods to pay overseas suppliers. How would you respond to that claim?
Rimas Kapeskas: Absolutely. The problems are the same in the B2B space, particularly for small business. Blockchain technology has many potential benefits to offer B2B transactions, including “smart contracts” and cross-border payroll processing.

The market is beginning to wonder whether the bitcoin hype was overstated, and instead many have turned to the blockchain – the underlying technology of bitcoin – to consider possible mainstream applications for B2B payments. How do you envision the potential widespread impact of the blockchain on international payments between businesses, if at all?
The blockchain technology is impressive, as it could foster a level of security we’re just beginning to understand. This is particularly interesting in the world of international transactions, where there is now less transparency and a higher potential for fraud. The blockchain technology could bring badly needed visibility to the system, especially in regards to identity management and authentication. Businesses will also begin to incorporate private blockchains into their business processes.

You mention the success of mobile payments with M-Pesa, which provides mobile banking services in various African nations. Safaricom recently announced that it is opening its M-Pesa API to allow businesses to pay each other through the service. How might businesses benefit from a mobile B2B payments solution? Do you see mobile B2B payments as having any potential even for large corporations?
When we talk about mobile today, a lot of people are just thinking about cellphones being involved in the payment process. Really, cellphones are portable computers – the form is just changing. We’re seeing an evolution of the payment process where our phones become our digital wallets. Even in a B2B space, there’s going to be a need for the facilitation of these transactions. I see a lot of potential, particularly in the area of micropayments.

As a logistics company, UPS holds the responsibility of making sure that goods get from point A to point B, and of course this includes border crossings. How might UPS itself – and all B2B logistics firms – benefit from being able to accept a global currency like bitcoin?
Some of the world’s major companies are starting to understand that the blockchain technology can be used for numerous types of international transactions, including paying vendors and payroll processing. UPS is always looking for ways to streamline the movement of goods, funds and information. Digital currency could eliminate many of the friction points that exist today, allowing more businesses to participate in global trade.

Source:  @pymnts

Breaking Down Barriers
If you’ve ever traveled abroad, you know that converting cash or using your credit card is often a hassle.

Calculating fair exchange rates and the fees involved is like trying to solve a math problem without knowing the variables.

In the world of global e-commerce, it’s the same problem.

Rules and regulations, as well as currency, vary by country. Unfortunately, not all merchants are capable of managing that level of complexity online.

If someone living outside the United States doesn’t have an American bank account and credit card, it’s nearly impossible to complete an online purchase from a U.S. retailer.

Put simply, a number of barriers can get in the way of buying what you want once you cross borders, even online.

A unified, global currency is the ideal solution, as it would simplify cross-border transactions.

But as recent events have proven, even regional currencies like the Euro struggle to keep national economies in order and are far from perfect in handling the complexities of a global economy.

A Virtual Hope
Technologies are advancing, even if governments struggle to keep pace. These platforms are fostering a globally accepted exchange mechanism, which would not require a unified monetary system.

This is where virtual currency could come into play. Digital money can be sent across borders without going through multiple intermediaries and currency swaps.

If recognized, its value is the same regardless of where you do business, eliminating friction points and facilitating the faster flow of goods.

In 2008, Satoshi Nakamoto published a paper, Bitcoin: A Peer-to-Peer Electronic Cash System, outlining the details of a payment system that would allow individuals to send and receive payments without intermediary financial institutions. This was the birth of Bitcoin.

It was not the first virtual currency but the first application of a new block-chain encryption technology.

While Bitcoin has suffered from a fair share of controversy and volatility in its nascent stages, the block-chain technology has created numerous possibilities for improving money transfers and simplifying payment processes – and revolutionizing many other industries.

More than 100,000 businesses already accept Bitcoin, including large companies like Microsoft, Home Depot, Dell, CVS, Expedia and Amazon.

Startup companies are tapping into hundreds of millions of dollars in venture capital investments.

Leading financial institutions and technology leaders like Barclays, Citigroup, the New York Stock Exchange and IBM are also making investments in the technology.

Many of your transactions today are already virtual and happening online.

It is no surprise, then, that currency will become easier, cheaper and more secure. Our whole concept of money and how it gets exchanged is going to change as we become increasingly digitized.

How we handle, store and exchange currency will continue to evolve – it’s just a matter of at what speed and where we will see it next.

Opening Up Trade
For global e-commerce to thrive, the movement of goods, funds and information must be both secure and seamless. Digital currency would allow consumers and businesses of all sizes and in all places to participate.

The fastest growth globally will likely be in the emerging markets of Africa, the Middle East and other areas of the world that have been traditionally less developed.

Vast populations in these communities are getting better access to technology and to capital, allowing them to easily exchange money, goods and services.

Mobile payment companies like M-Pesa are giving millions of people access to the formal financial system, stimulating business and reducing crime in otherwise largely cash-based societies.

From our vantage point, the driving force globally is that all companies and consumers can easily do business with one another.

In other words, it doesn’t matter where those goods are coming from – UPS can provide the transportation solutions to ensure speedy delivery. We just need the technical and regulatory advances that will allow global financial transactions to happen.

Virtual currency seems like a logical next step, one that could bring markets closer together and facilitate faster trade.

Usually, the advances that stand the test of time are the ones that most effectively eliminate barriers and make commerce easier – perhaps that’s why global trade is so ready for a global exchange system that enables seamless transactions. - 24/7 Support including Chat

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