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Russia's sudden disconnect from the global financial system is an issue worth pondering. But fragmentation in the economy also comes at a cost.
Drastic sanctions from the West and its allies will drastically reshape the way entities around the globe transfer money to each other. According to the expert, this could create more openness to cryptocurrencies. Large companies can use it as a way to conduct business around the world.
"More and more you're going to see more and more corporations using cryptocurrencies," said Mitch Thomas of FinLync, a corporate treasury services firm. "You're going to see more exchanges between financial corporations and treasury officials."
Thomas is FinLync's head of North American base solutions engineering, who offers swift-free solutions to connect corporations and banks as well as fund management services.
Given that the U.S. is likely to adopt a policy of monetary contraction, limiting Western countries' access to the U.S. dollar greenback, while small Fiat currencies pose more risks, companies may turn to cryptocurrencies, non-governmental payment systems, Global and without censorship.
However, Thomas said that the trend towards cryptocurrencies or other digital payment tools will not be large. This is partly because companies' usage has not yet reached enough saturation to create network efficiency.
"There aren't many companies that consider the possibility of full use and trust to pay bills in cryptocurrencies… So from a business point of view, I don't think it's going to be widely used," he said.
The sporadic use of cryptocurrencies to trade with small countries is not a good thing. Many banks were restricted after the 9/11 attacks to "prevent risks." But this has left many banks in geopolitically disadvantaged regions unable to access the global financial system, having a serious impact on people's daily lives. Moving against Russia quickly could help save ukrainian lives. In the long run, many agree with Thomas's forecast of financial fragmentation.
This will put pressure on the global economy. Remember Adam Smith's words: Division of labor and specialization increase productivity, but shrinking and limiting markets affects the ability to specialize. This condition will be slow and smouldering, its impact will last not only several years but decades.
At its highest level, it identifies with other "globalization reversal" trends, such as U.S. efforts to separate medical production and other key industries from China. The specialization of production helps to create super productivity, but it is also very fragile when it comes to depending on global trade and exchange. This means we are moving to a world with a shorter supply chain, with higher prices and lower profits.
Cryptocurrencies can be seen the same way. For those who understand blockchain, they all know that they can't be as effective as traditional banks that have a long-standing reputation and the trust of the majority of people. In the case of global payments, cryptocurrencies are also not necessarily an urgent technological solution for the banking network. The network was streamlined, but fragile in the face of the current volatile political situation.
