Are cryptocurrencies the future of global financial systems: An analysis



In the light of the Coronavirus pandemic, everyone seems to be talking about the future of global financial systems. Analysts, economists, financial experts and investors are all worried about the short and long-term impact that global issues like the Coronavirus will have on global finance.

This is not the first time that the world is facing such an issue. Wars, natural disasters, as well as man-made problems have exposed how fragile our financial systems are. In the recent past, the 2007-08 financial recession, trade wars between USA and China and hostilities between USA and Iran are enough proof of how the world gets affected.

It should be pointed out that a stable, encouraging and cohesive global environment is necessary for development. In this article, we will look at some important issues that are responsible for fostering a healthy global financial system.

Why ‘Trust’ is an important factor for a positive global financial world?

From the last four decades, the world has moved ahead from a ‘gold standard’. All countries of the world are now using a ‘Fiat Currency Model’ to value currency, operate trade, do transactions and create monetary policies.

A dollar is worth so, because the American government says it is worth that. The Yuan is worth so, because the Chinese government says so. This system has been serving the world well enough for the last three-odd decades. However, the question remains, what next.

Investors, policy experts and practically the entire world runs on trust. If you trust a company, you invest in its stock. If you trust a stable government, you buy government bonds. The post 2007-08 crisis has eroded a significant trust factor.

This has been compounded by inward looking financial policies of states, bad monetary policies and the rise of a protectionist framework. This is not a sustainable model as the world is too interdependent because of globalization.

What are some of the changes that can be done to bring back the confidence?

One of the only ways by which we can create a turnaround is to make financial systems more resilient. The strengthening of systems will improve the trust factor. Money is too inextricably tied to political, social, defence, cultural and other factors. It is high time that we start looking for ways to shield the economy from them.

Nations need to come together and figure out a way by which occurrences like Coronavirus do not have the power to throw economies out of gear. The need of the hour is to use technology and innovation in the sphere of finance to improve the resilience factor. Can you imagine what a positive impact a strong global economy could have had during the Coronavirus pandemic?

Financial inclusion through technology, eliminating intermediaries, reducing payment commission rates and other policies could have gone a long way to lessen the impact of the COVID 19 fallout.

It is necessary that platforms like the World Economic Forum, World Trade Organization, International Monetary Fund, World Bank, and the United Nations come together and engage in a positive dialogue.

Is there a way out of this problem?

If you have been following the economic news and stock markets, you will notice something incredible happening. Cryptocurrencies, like Bitcoin have been making a strong comeback as a viable financial asset.

Most of the problems that we have listed above can be solved if the world starts moving towards a cryptocurrency model. From bringing in more people into the financial system to having an asset, which is free from external influences, Bitcoin helps solve 99% of these problems.

It is important that we start exploring alternative solutions to global financial problems immediately and aggressively. You can find more info relating to the problem here.