Financial sanctions date back as far as the Peloponnesian War, when Athens tried to block merchants allied to Sparta. In modern history, Cuba has been under an economic embargo since 1960, but the use of sanctions has really accelerated since the 9/11 terrorist attacks. As it stands, the US Treasury is one of the world’s most powerful geopolitical bodies, which is leading to questions about the desirability of the US dollar as the backbone of the international financial system. For years now, the US dollar has served as the foundation for the global financial structure. As sanctions become more popular as a political weapon, the debates amongst the financial community are also heating up. The possible solution to diffuse building tensions? Digital currencies.
With news that the US has expanded its list of Russian organizations and individuals subject to sanctions, cryptocurrencies are in the spotlight for the role they can play in providing stability in moments of crisis. They can, essentially, lead an economic structure which can be analyzed in a completely unbiased way.
The latest sanctions come after Microsoft claimed it had thwarted Russian attempts to launch cyberattacks against US conservative groups. The US Treasury’s additional sanctions are reportedly against two Russian shipping companies it suspects of trading with North Korea. Many are worried, confused, and tensions seem to be continuously rising; the general public needs something that will bring some sort of comfort during these times. The main ongoing debate is whether or not these sanctions are needed. How can we create a better, more dedicated, yet stern government body? Trust is needed to ensure a safer and peaceful environment, and cryptocurrencies can help to establish this trust.
One of the most overlooked aspects of cryptocurrency is its power to run immutable functions on the blockchain. Nothing can be changed once its published, and it remains there. With this in mind, countries could potentially use this immutable function to build up trust between one another. No country could fake any transaction, and everything would be legitimized and verified via blockchain.
The aforementioned sanctions by the US authorities, critics allege, amount to abuse of the US dollar’s position as the world’s reserve currency, and mean that alternative global financial infrastructures need to be developed. These comments do not come from some “crypto radical,” but from the German Finance Minister who this week called for the creation of a new payments system not reliant on the US. Heiko Maas said Europe should not allow the US to act “over our heads and at our expense” in its increasingly regular use of financial sanctions. So how can we fix this? A complex, yet achievable solution would be by adding a secondary underlying economic alternative, in the form of cryptocurrency.
Maas’ statements were definitely interesting. While completely disabling the United States from being at the forefront of global economic activity is improbable, and more than likely impossible, the question now raised is whether or not a new sort of infrastructure needs to be enabled. While cryptocurrency may remain debatable as an asset, it is no secret the technology behind it has computer scientists around the world thinking hard. Enabling immutability and speed of transactions within a global economy could be a starting point.
Countries could utilize it in a test field; let’s take a theoretical example, certain countries are entered into a pool where a cryptocurrency has set restrictions on what can be purchased, however no specific sanctions are applied. A global consensus is reached after transactions are completed thoroughly and efficiently. The transactions and actions can then be analyzed one by one for specific discrepancies, and if anything goes awry within these transactions the consensus sets a restriction. Rather than speculation, for the first time pure fact and democracy is technologically integrated into a financial system.
In times of economic crisis, we have seen countries turn to cryptocurrency. Why? If needed, cryptocurrency can be coded to possess only a finite amount. On a global scale, even as a sort of global economic collateral, something like this could keep the global economy flowing in a way that is beneficial for all parties. Countries currently under sanctions could then undergo tests. If they fail in the initial stages and try any transactions that regulators have agreed they would not perform, or if other concerns arise, then a mandatory sanction could be established. Diplomacy could then be reliant on factual and immutable information, something that has not been seen to date, but may soon be possible.