The stunning excommunication of Russia from the global financial system will dramatically reshape the way global entities of all sorts move money. According to one corporate treasury expert, that will likely include more openness to cryptocurrency as a way for big companies to do business around the world.
“Going forward, you will see more [corporate] adoption,” said Mitch Thomas of FinLync, a corporate treasury services firm. “You will see more conversations among corporate finance and treasury officials.”
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Given the risks of smaller fiat currencies and the potential for the West to restrict access to the dollar-based economy, companies could potentially look to crypto – non-state, universally accessible and censorship-resistant monetary networks – as “a global settlement system,” Thomas said.
Thomas thinks big companies are having those conversations internally right now. “Should we be looking into how to invoice and settle in crypto in the future? Not just for situations like [the war in Ukraine], but for countries where corporates don’t care to have banking or don’t want to be exposed to a very risky Middle Eastern or African or South American currency?”
Thomas is North American head of solutions engineering for FinLync, which provides a non-SWIFT method for connecting corporations and banks as well as treasury management services.
Thomas does not foresee a broad shift towards crypto or other digital tools for payments, though, in part because corporate usage hasn’t reached enough saturation to create network efficiency.
“There aren’t enough companies that have fully thought through the ability to settle and trust company invoices with cryptocurrency … So I don’t see it being used broadly from a corporate perspective,” he said.
Fragmentary adoption of crypto for trade with marginal nations is not, to be clear, good news on the whole. Post-9/11 banking restrictions, usually framed as “de-risking,” have already led to many banks in geopolitically troubled regions losing access to the global financial system, with serious impacts for everyday people. Moving so swiftly against Russia will hopefully help save Ukrainian lives, but in the longer term many agree with Thomas’ prediction of further financial fragmentation.
That would inevitably put downward pressure on the global economy. Remember your Adam Smith: Division of labor and specialization increase productivity, but shrinking and restricting markets interferes with the ability to specialize. This strangulation would be slow and subtle, its impacts stretched over not years, but decades.
At the highest level, it aligns with other trends towards “de-globalization,” such as America’s (so far largely rhetorical) effort to “re-shore” medical production and other key industries from China. From the fragile hyper-efficiency of just-in-time production, we are shifting back to a world of shorter supply chains – but also higher costs and lower profits.
Crypto can be seen in similar terms. As anyone who understands blockchains knows, they are less efficient in most senses than traditional trust-based banking. At least in the case of global payments, crypto is not so much a hopeful bit of technological progress as an emergency backstop when human frailty undermines the current streamlined but politically fragile banking network.