Cryptocurrencies are dominating the news right now, as their influence spreads around the globe. A cryptocurrency is a digital or virtual currency that is protected by cryptography, making it nearly impossible to counterfeit or double-spend. Partly, this rise is being driven through multinationals adopting cryptocurrencies. Tesla have invested $1.5bn into bitcoin, while services such as PayPal have adopted it early on. And with the news that El Salvador is accepting Bitcoin as legal tender, it seems like cryptocurrencies are beginning to change the face of international business.
El Salvador: what could this mean?
El Salvador began to accept Bitcoin as legal tender on 7 September. Such is the government’s interest in the cryptocurrency, they’ve offered every citizen $30 in bitcoin if they sign up for a government digital wallet. The move was pushed as the government calculated that it would help the Salvadoran diaspora transfer money back home with no commission. This could save the country around $400 million a year per President Nayib Bukele, while also providing financial services to citizens without a bank account.
But are there any adverse effects it could have? There are worries for the citizens. Such a volatile currency could see the value of savings rise and fall unpredictably. Meanwhile, the software can be complex and difficult to understand, which could alienate groups. Bitcoin is also beyond the reach of any national jurisdiction, which could help illegal activity occur. Money laundering is just one concern springing from this.
What do cryptocurrencies mean for international business?
Widespread adoption of cryptocurrency could have some advantages for international business though. One area it could help is in arranging the payroll of a global workforce. Paying staff in different countries means that salaries have to be calculated in each different currency before the use of banks in distributing wages globally. With cryptocurrency this will all be cut out, as transactions can go across borders, quickly, with lower fees.
Cryptocurrency transactions are available publicly for all to see. This could raise transparency for crowdfunding and investments, raising the trust of donors.
Cryptocurrencies could also make it easier to provide employees with company equity. In a similar way to making salaries easier to pay, companies could offer equity to their employees in the form of cryptocurrencies rather than stocks.
With increasing adoption across the globe, it appears as though cryptocurrency could revolutionise global finance. This can be a tricky field to navigate, as the technology is new to most people. At this time, when you’re trading internationally, it’s going to be important to have a reputable international law firm to carefully guide you through the new terrain.