The complexities of global trade demands innovative solutions, particularly for enhancing transparency and security in supply chains within high-risk environments. Enter blockchain technology: a transformative tool that ensures the integrity of transactions and authenticates the provenance of goods with unmatched clarity. This technology is pivotal in adhering to Anti-Money Laundering (AML) standards, sanctions, and fiscal policies and plays a significant role in refining supply chain operations to meet Environmental, Social, and Governance (ESG) benchmarks. This article explores blockchain's strategic advantages to international businesses, setting a new standard for conducting trade in an increasingly interconnected world.

This article was written by Mourad Seghir and Iman Zalinyan. Mourad and Iman are part of RSM Netherlands Business Consulting Services with a strong focus on Technology and International Trade.

The BRICS alliance, led by Brazil, Russia, India, China, and South Africa, represents a significant global economy conglomerate known for its combined financial power and expanding influence. With talks of incorporating countries like Saudi Arabia, UAE, Iran, Ethiopia, and Egypt, BRICS demonstrates a clear vision for diversification and a more inclusive global presence. Parallel to its growth, the alliance is actively adopting digital payment mechanisms, which signifies its commitment to modernizing economic systems. This transition to digital platforms indicates BRICS's agility and pursuit of creating a more inclusive and efficient framework for international trade, aligning with the evolving digital landscape.

Catching up with CBDC developments

Money has taken many forms over the centuries. In fact, it’s not even always been money. It gradually evolved from bartered commodities to pieces of metal before becoming paper money and, eventually, debit and credit cards. The next step in this evolution could be central bank digital currencies (CBDCs). At the heart of CBDCs lies blockchain technology, a decentralized ledger that records transactions across a network of computers.

Source: CBDC Tracker, Today's Central Bank Digital Currencies Status (Interactive map), cbdc

As depicted, CBDCs are currently in operation and actively being investigated. Over 12 countries have launched one, and another 21 have pilot programs. A further 79 are developing or researching a digital currency. This development shows no sign of slowing down.

As shown in the image below, BRICS nations have shown a strong interest in enhancing their financial systems, particularly in exploring the potential of CBDCs. During a recent meeting in Sao Paulo chaired by Russia, finance leaders highlighted the issue of current payment systems being exploited for economic coercion.  They discussed improving the international financial framework, possibly through a BRICS-wide digital platform called BRICS Bridge, reminiscent of mBridge, a CBDC project involving China and the UAE. This initiative aims to connect existing CBDCs and national financial messaging systems, avoiding dependence on dominant currencies like the US dollar or China's renminbi. With recent additions of BRICS countries, now expanded to ten, are considering various options, including using a standard 'unit of account' to facilitate trade among themselves without relying on a single dominant currency.


The Benefits of the use of a transparent ledger for international business

Unlike traditional payment systems, blockchains are generally immutable and transparent, with each block of data cryptographically linked to the previous one, ensuring the integrity and traceability of every transaction. This brings benefits for businesses involved in international trade, demonstrated in the table below:


Forward Thinking

The distinction between permissioned and permissionless blockchains is vital for understanding the challenges associated with CBDCs. CBDCs typically operate on permissioned blockchains controlled by a central authority like a central bank, while permissionless blockchains allow anyone to participate without approval. Permissioned blockchains offer control and can boost security and regulatory compliance but are less transparent than permissionless ones, as the central authority controls information sharing. In the future, integrating blockchain into areas like supply chain management could enhance transparency and streamline reporting, revolutionizing sectors with increased visibility and efficiency in complex processes.

Integrating CBDCs into international trade harnesses the power of blockchain technology to usher in a new era of transparency, efficiency, and security. The immutable and decentralized nature of blockchain ensures that every transaction is recorded, verifiable, and traceable, offering significant benefits in fiscality, sanctions compliance, AML, supply chain due diligence, and identifying high-risk entities. As the adoption of CBDCs continues to grow, their impact on the global trade landscape promises to be transformative, setting new standards for accountability and trust in international transactions.

RSM is Thought Leader in the field of International Trade and Technology consulting. We offer frequent insights through training and sharing of thought leadership that is based on a detailed knowledge of regulatory obligations and practical applications in working with our customers. If you want to know more, please reach out to one of our consultants.