Globalization

How Cryptocurrencies are Driving Globalization

Globalization and Crypto

Globalization 101 defines the term globalization as follows:

“Globalization is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology. This process has effects on the environment, on culture, on political systems, on economic development and prosperity, and on human physical well-being in societies around the world.”

From the above definition, it is obvious that one of the main factors accounting for globalization is technology. Technological advancements in transportation and communication have gone a long way in bringing the world together. With the invention of Bitcoin and the proliferation of other cryptocurrencies, the unrestricted interaction of economies and complete financial inclusion is a possibility for the entire world.

Recent Setbacks to Globalization

The world has been on the path of globalization for centuries. There has, however, been some minor setbacks in recent times. An example is the recent retaliatory trade policies the United States of America and China have targeted each other with. The decision of Donald Trump to pull the U.S.A out of the unprecedented Paris Accord is another. In addition, we have seen more politicians with anti-globalization policies being favored by electorates. Brexit is an example of such a policy as well as how regional political organizations have been struggling to keep things together. Donald Trump, who is in favor of a more closed American economy, got elected and Marie Le Pen of France almost got the nod.

All is not lost. The globalization drive is still going on in various ways and cryptocurrencies are a contributing factor.

Ways in which Cryptocurrencies can drive Globalization

Regional integration is one of the steps taking towards globalization by most countries. This way, smaller groups of countries with more in common in terms of geographical location, culture, and economic power integrate. This happens in the form of regional political organizations like the European Union and the African Union. There are also multilateral trade agreements and treaties like the North American Free Trade Agreement (NAFTA).

Two common goals most regional political groups set out to achieve is political and economic integration. The European Union made giant strides in this area by creating a well-functioning political union made up of countries with a history of decades of war. When it comes to the economic aspect, one great achievement was the creation of the Euro, a common currency for members of the European Union. This success has however been overshadowed by severe economic problems in some member states like Greece and Spain.

The African Union, on the other hand, set out to achieve political and economic integration by first creating sub-regional organizations like the Economic Community of West African States (ECOWAS) and Common Market for Eastern and Southern Africa (COMESA). ECOWAS, for instance, has chalked certain successes like allowing free movement between member states and initiating the process of combining all the stock exchanges in West Africa. The organization has, however, struggled to launch its proposed common currency known as the ECO. The reason for this is the different stages of readiness and varying economic powers of the various member states.

The above-stated problems of creating and maintaining a common currency can be fixed by adoption of cryptocurrencies. By adopting cryptocurrencies as legal tender, such regional organizations can bypass the tedious and never-ending bureaucratic processes involved in creating a common currency. We know this is possible because a country like Japan views Bitcoin as a legal tender. By giving cryptocurrencies the green light, such international governmental organizations can easily have a common currency without having to discard their own national currencies.

Cryptocurrencies also bring about more foreign direct investments. In the wake of the success of most cryptocurrencies, many businesses have been created in different countries to provide services and products in the ecosystem. Crypto investors have not shied away from setting up businesses in different countries all over the world.

Other Barriers to Globalization Cryptocurrencies Remove

Almost no states have been left out of the adoption of cryptocurrencies. Even an isolated state like North Korea has found ways to get involved. Users of cryptocurrencies all over the globe are a single community with shared interests and goals. Nationality or religious affiliation almost means nothing when participants in the cryptocurrency space come to together to work on projects. This is a way in which cultural barriers to globalization are removed.

As mentioned earlier, there is the tendency of governments to create anti-globalization policies in recent times. Such policies become economic barriers to interaction between states. Once again, with cryptocurrencies, such barriers can easily be circumvented. The nature of cryptocurrencies makes it possible for them to be used for borderless transactions without any censorship. In fact, countries under sanctions have been known to use cryptocurrencies to go around the sanctions.

More often than not, whenever a state signs some form of trade agreement or treaty, some interest groups show up to oppose the move. This is often because such groups believe such moves to interact with other states would not be in their interest. This problem stems from the fact that most trade agreements are set up to favor the more powerful states in the global system. Once again, with cryptocurrencies, the smaller and less powerful states have a chance to benefit. For instance, cryptocurrencies have made it possible for people in developing states to have access to remote jobs that would otherwise be unavailable to them. Such countries can also take advantage and position themselves to be the global leaders in the future. This can be done by investing in cryptocurrencies and/or making their countries friendly business environments for cryptocurrency businesses. Puerto Rico is known to have taken such steps to aid economic recovery from devastating natural disasters.

Like it did with communication and transportation, technology is linking the world through cryptocurrencies.