As a seasoned analyst with a career spanning over three decades, I’ve witnessed numerous economic and political shifts that have shaped the global business landscape. In light of the potential erosion of rule of law and accelerated corruption, I believe it’s crucial for businesses to adapt and prepare for such scenarios.
Does your organization prepare for potential catastrophic situations or worst-case scenarios? How would you respond if there’s a deterioration in the rule of law and an increase in corruption?
2024 stands out as one of the most significant and crucial election years ever, occurring amidst global turmoil. Europe, once again, is embroiled in conflict, and the post-World War II international system faces tension. However, while decentralized technology can’t prevent a complete breakdown of law and order, such an extreme situation seems improbable.
Despite the ongoing strength of legal norms, there’s a persistent risk of their erosion. Certain extreme political actions might destabilize businesses and deter investors who thrive in consistent and reliable conditions, potentially causing major issues for companies. I’ve pinpointed three risks that can be mitigated through strategic use of decentralized technology:
- The one that most blockchain boosters think about right away is currency manipulation. From printing money to finance deficits to pre-election spending splurges, central banks and treasuries face a lot of political risk. Shifting away from volatile local currencies to stablecoins is the most practical alternative for businesses. Keeping as little of volatile local currency as possible is advisable, where it is legally permitted.
- Another big risk is political interference in the judiciary. Courts are where people go to resolve disputes, and if the umpires are corrupt, the risk of a bad or unfair outcome is high. The best option is to stay out of politically compromised courts as much as possible. Moving from paper contracts to transparent, blockchain-based smart contracts that are enforced automatically offers an opportunity to reduce the risk of nonpayment or disputes. Furthermore, it increases the likelihood of automated and fact-based dispute resolutions.
- Corruption at all levels is another big risk, internally and externally. Corrupt officials often pursue arbitrary regulatory actions or selective and extreme enforcement against firms that won’t play ball. Their best ally in this process is opacity. Corruption is never popular, and bad actors rely on others’ silence to get away with their behavior. The best protection against this kind of rent-seeking is extreme and total transparency. If all your orders, shipments, purchases and prices are public, then theft is immediately visible to all.
In mature economies, businesses might be reluctant to fully adopt extreme transparency as a strategy, but it’s indeed a viable and effective choice, as demonstrated by a case in Maharashtra, India. Here, farmers belonging to the Sahyadri Farmers Producer Company, tired of fluctuating prices and excessive markups from middlemen, turned to blockchain technology, specifically Polygon, with assistance from a local tech startup, Emertech. This decision led to reduced operational costs and more equitable pricing for all parties involved.
As an analyst, I’ve observed a significant disparity in the adoption rates of cryptocurrencies between individual consumers and businesses, particularly large enterprises, across many countries. This disparity stems from the fact that, while companies, especially big ones, are often bound to abide by even seemingly arbitrary rules due to their tangible assets like real estate and factories, individuals can sometimes navigate the regulatory landscape with more flexibility.
As a crypto investor, I firmly believe that blockchains and digital currencies can help businesses navigate some of the significant political challenges ahead, but it’s essential to remember that making money involves taking calculated risks. To reap the rewards, you must immerse yourself in the market, invest in assets, collaborate with people, and be prepared for the unpredictable fluctuations that come with it. After all, no risk, no reward.
As a seasoned observer and participant in the cryptocurrency world, I have learned to approach every new development with a critical eye and a healthy dose of skepticism. Through my years of involvement in this dynamic industry, I have seen countless projects come and go, some successful, others not so much. While I always strive to keep an open mind, I believe it is essential to carefully evaluate the merits of each new venture before making any investment decisions. In doing so, I aim to protect my own financial interests while contributing to a more informed and responsible community. It’s important to remember that the views expressed in this article are solely mine and do not necessarily reflect those of CoinDesk, Inc., its owners, or affiliates.
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2024-08-06 20:15