With the help of digital assets, global trade has the opportunity to revolutionize the way it operates.
Years ago, businesses had to patiently wait for a minimum of 2 working days and a maximum of 5 working days to successfully make a cross-border payment. This unsustainable means of cross-border transaction resulted in the loss of valuable resources; time and money. Business stakeholders were not comfortable with the old global payment procedure, there was a high demand for faster cross-border payments, something needed to be done, and technology rose to the task by helping businesses streamline their global payment processes.
Today, cross-border payment is effortless, unfortunately, we can’t say the same for trading procedures beyond borders. The global trade system has a missing piece to its puzzle, there are heaps of paperwork at ports globally which is one reason why there are delays in the trade procedure. These delays have an undesirable impact on cash flow and delivery dates and they are causing frustrations for stakeholders, fortunately, the delays can be cut off.
The world is going through a new trajectory and digital assets are arising, you must be familiar with some of them; cryptocurrencies, Non-Fungible Tokens (NFTs), and Decentralized Finance (De-Fi) which are outgrowths of blockchain which is a transparent and secure technological innovation. In this article, we will look at the inefficiency of the existing global trading system, how digital asset markets boast of a global reach, and how digital assets can reshape the global trading system. By the end of this article, you will understand the reasons the implementation of digital assets into global commerce is a needed transformation.
Inefficiency In The Existing Global Trading System
Inefficient is the most appropriate word to sum up the global trading system. Some common inefficiencies in the global trading system are complex regulations, trade disputes, inefficient infrastructure, and political instability. Aside from these, we’d like to briefly talk about two major inefficiencies in today’s global trade system.
- Semi-transparent system:
Whether with intention or not, the global trade system conceals information that companies need to track shipments, and this transmutes unwanted results. For example, if a shipment is caught in a climate system, the companies importing the cargo on board are not aware of the updated arrival period because they don’t get real-time data on their shipments. The importer keeps waiting and might not be able to take any action till the ship docks which is the reason behind some lost sales, canceled orders, and dissatisfied customers.
- Heavy reliance on intermediaries:
Global exporters lean on banks and brokers and it serves as a roadblock to small and medium-sized enterprises (SMEs) whose growth is under threat as they lack the resources to deal with a high cost of trading. This means the global trade ecosystem is not inclusive and only a few businesses can effortlessly participate in the international markets and enjoy the new opportunities in these markets.
A New Dawn: The Global Reach of Digital Asset Markets
The digital asset market keeps evolving, and digital assets trading is being embraced globally, for example, in USA the percentage of people who reported to have used cryptocurrency (a digital asset) jumped from 5% in 2019 to 16% in 2024, global investors are also converting their assets into digital form through digital asset tokenization and while the global trading system suffers in this dark season the global reach of digital assets can set forth a new dawn.
Digital assets can single-handedly revolutionize global trade, these innovative assets are capable of increasing the transparency of global trade and fostering a streamlined process of trading across borders.
How Digital Assets Can Reshape The Global Trading System
Digital assets reshaping the global trading system is not a mirage, indeed it can become a reality. The ingenuity of digital assets needs to be taken advantage of for rapid and tremendous change in the global trade system. The digital asset offers risk management through immutability as well as easy and seamless payments. Aside from these, let’s see how digital assets can enrich some vital characteristics of global trade.
- Transparency
Tracking and identification of goods is difficult in the old supply chain, this immediately changes when blockchain’s reviewable and immutable records come in. For example, a Brazilian consumer who wants to make sure her chocolate comes from an ethically worthy source can track the pathway of her chocolate from the cocoa farm to the chocolate pack in her hand. When implemented, blockchain can strengthen the consumer and enhance trust and accountability within the supply chain against fraudulent activities.
- Empower SMEs with smart contracts
Smart contracts present an opportunity to help SMEs source for funding and build credibility with buyers across the world. With the help of a smart contract, for instance, an SME in Africa could export handcrafted footwear to a retailer in Asia. Once the goods are delivered or once any agreed requirements are met, the self-executing agreements could automate payments. With smart contracts, small and medium enterprises (SMEs) have the resources to carry out business transactions without the need to depend on other financial bodies.
Conclusion
With the help of digital assets, global trade has the opportunity to revolutionize the way it operates, however, to unleash this potential every stakeholder has to collaborate and lay the foundation for an innovative, inclusive, transparent, and efficient global system.
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