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There are moments that change the world, creating seismic changes that seem instantaneous. The ongoing cycles of the COVID pandemic and the collapse of the Russian war in Ukraine have changed the world. These shifts are felt every day in the business world, where we are seeing a wide range of digital solutions being adopted to overcome volatility. Shortages and lockouts exacerbate inflation; money exchange; And of course stress on global supply chains. As a result, public and private organizations around the world are turning to blockchain-powered crypto and enterprise ecosystem solutions.
Background: Digitization of commerce under covid
The outbreak of Covid has increased the urgency of digitizing business, and the war in Ukraine has escalated even further. We’ve learned that digitization alone won’t prevent goods from lingering in customs and shipping for long periods of time due to paper processing issues. In many cases, in the past years, goods still could not be downloaded because the paperwork in those pop-up digital processes still needed to be reconciled between the parties in a “manual” way. Even though the papers were digitally scanned, he still had to “sign and stamp” them to move on to the next step in the process.
Trading through public ledgers and smart contracts can greatly reduce transaction costs as the reconciliation process in the trading ecosystem is automated. Now, because of the war in Ukraine, this skill and agility is critical. According to the report of the International Chambers of Commerce, with full digitization, global trade could increase by 9 trillion dollars in 5 years and trade turnover would increase by 46%. Such reductions in operating costs could lead to positive GDP growth and increased access to capital for small and medium enterprises (SMEs), thereby reducing the $1.5 trillion trade finance gap. This funding will be crucial as part of post-war reconstruction in Eastern Europe.
Blockchain-powered business outcomes are not limited to the enterprise. The results of the cryptocurrency boom in Russia and Ukraine are interesting and reflect the differences between the two countries’ regulatory environments before the invasion.
In Ukraine, whose control area is accepted and promotes the adoption of digital currency, the government has collected a lot of money through the efforts of NFTs and other cryptocurrency.
This lack of regulatory promotion has limited the use of cryptocurrency for transferring funds in and out of Russia. In fact, international sanctions against Russia are now restricting the exchange of money, so the dependence on the ruble is becoming more difficult.
The battle reveals five wartime benefits for countries that introduce cryptocurrency under control — benefits for both the government and its citizens.
Cryptocurrency improves access to capital in times of war
The war in Ukraine has led to a sharp increase in bank withdrawals as Ukrainians prepare for an indefinite period. To prevent capital flight, the Ukrainian government recently banned its citizens from buying cryptocurrencies in the local currency.
Meanwhile, as the ruble fell, Russian citizens looked to cryptocurrencies as a store of value because they were not tied to, or indeed connected to, local instability. These citizens can only use digital currencies for daily purchases. But this vehicle of wealth could offer citizens the safe harbor of a decentralized, censorship-resistant capital. During the conflict, crypto has become an increasingly popular method of trading, as it is seen as a safe alternative method of obtaining finance.
Cryptocurrencies can mitigate inflation.
In situations where traditional currencies tend to fluctuate during times of war, the use of international cryptocurrencies can reduce price and currency supply volatility. Russia’s invasion of Ukraine has caused markets for alternative oil, wheat and sunflower crops to plummet. To combat inflation, both consumers and SMEs can consider cryptocurrencies as a shelter of value and protect against depreciating currencies.
Blockchain improves transparency and makes fundraising more public
Ukraine, now the leader of digital assets and cryptocurrency in Eastern Europe (with significant adoption even before the invasion), has raised a lot of money in recent months by receiving donations through crypto exchanges to help finance the Department of Defense.
The War Museum NFT helps supporters donate directly to the Ukrainian government without an intermediary organization, ensuring that transactions are public and secure, including donations. The information is recorded in a decentralized blockchain network, which makes it difficult to hack the information. The system is available to everyone at the same time, which contributes to the efficiency and transparency of the transaction.
Blockchain can help Ukraine rebuild. Improving access to capital
While traditional legacy banking systems take three days to complete a cross-border transaction, blockchain networks allow transactions to be settled in several minutes. In late March, Ukrainian lawmakers called for Ukraine to be admitted to the European Blockchain Partnership (EBP) to support Ukraine’s reconstruction. Joining the global organization will achieve its goal of facilitating cross-border access to electronic services.
Looking at the future of digital business
Multinational companies must expand their thinking to connect their ecosystems with trusted information sharing on common workflows. For example, empowering digital identity, supply chain provenance, and digital asset workflows with blockchain not only leverages new market model capabilities, but also creates the potential to increase the necessary efficiencies indefinitely. What we are seeing in 2022 is just the beginning, with valuation and acceptance growing for cryptocurrency and blockchain.