Banking

Moving into a Multi-Currency World

3rd July 2019

Moving into a multi-currency world seems to be the solution to most of the prevailing problems that surround cross-border transactions. Mainstream industries are already generating models than can accommodate this multi-currency financial system.

Why Is The US Dollar So Popular?

The historical attachment of global currencies to the US Dollar appears to be the barrier withholding the restructuring of cross-border financial systems. The Bretton Woods Accord introduced an exchange rate system that pegged other international currencies to the US Dollar. After the collapse of the accord, the next era of free floating currencies retained the US Dollar as reserve currency.

This explains why the US Dollar remains the most acceptable and most demanded currency in the world. Take for instance, a businessman traveling from a country in West Africa like Nigeria to China cannot convert his Naira directly to Chinese Yuan. He will first convert his Naira to the US Dollar before embarking on his trip. On arrival, he will have to convert the US Dollar that he now holds into Yuan to be able to make any transaction.

The above description is a multi-step approach that  incurs cost, accommodates complications and increases complexity. This is the kind of problem that the global financial systems are trying to solve by moving into a multi-currency world.

Multi-Currency Introduction in the Mainstream

A large contender pushing the multi-currency boundaries is cryptocurrencies. As they have created a faster, more cost-effective and easier method of sending money cross-borders. There are some innovations in the mainstream that are already offering multiple-currency services on card systems. This is a step that has eased the stress and complications associated with the previous single currency card systems.

Even with this innovation, there still exist limitations, as these cards are unable to reach certain parts of the world. With this comes the idea of a universal card that is flexible enough to accommodate a limitless amount of currencies, both fiat and cryptocurrency, as long as a value exchange process is established.

A Multi-Currency Solution Using Blockchain

Blockchain technology has made this possible, and the innovation by tap enables the implementation of a one card system that can function in every part of the world.

The tap prepaid Mastercard® is crypto and fiat based and compatible with any existing payment platform that is supported by Mastercard. What this means is that by holding a cryptocurrency asset this can be converted and funded to the tap prepaid Mastercard, you have already achieved a multi-currency system.

This is a leapfrogging mechanism that bundles all the logistics and bureaucracy involved in restructuring the current cross-border payment framework, while still efficiently delivering the end result.

This does not in anyway negate the efforts being made by mainstream institutions towards achieving a holistic de-dollarised financial system. Already, the fluctuating US Dollar amidst the instability of the American economy is a serious concern for most oil producing countries. Some of them are already detaching themselves from the traditional pricing of oil in US Dollars.

Russia for example have since introduced the Urals crude oil futures denominated in Roubles at the Saint-Petersburg International Mercantile Exchange. The Iranian Oil Bourse has been using the Euro, the Iranian Rial and a basket of other currencies to settle oil deals since July 2011. These scenarios are another layer of moving into a multi-currency world.

For simple universal transaction purposes, blockchain technology has offered us an ideal solution to a problem that has lasted generations. The tap prepaid Mastercard system is already spreading fast and is available for issuance across European nations for now, while it can be used anywhere in the world.

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