I felt it was too important to miss especially in these current sanctioned and trade tariff times. Pioneering this effort is an American company called Relex (RLX), the world’s first cryptocurrency-based real property development and investing group.
This approach allows investment in projects during the development phase, resulting in passive income, equity stakes, or proxy ownership of property(s). Initial projects are based in Vietnam, Vladivostok (Russia), Cambodia, and Myanmar, which for various non-business reasons and external barriers have been politically shunned on the FDI scene of late, although showing strong, solid growth. Included was an on-site visit of their first large oceanfront development in DaNang. Among those attending were a broad cross-section of businesspeople from throughout the international community, investors, financial advisors and developers.
It is clear that businesses in a number of countries are feeling various and increasing pressures from their governments, banks and similar regulating/regulated groups to conform within ever-narrowing, ever-thornier investment opportunity corridors. This has been emphatically and clearly shown through sanctions, trade and tariff confrontations, as well as a host of other political and financially erected barriers.
There even was a consensus that with the onset of these vigorous trade disputes and tariffs, significant inflation is in the cards regardless of the Federal Reserve or other central banks tinkering.
Global free trade as we have come to know it traditionally is coming to a critical juncture of change, perhaps never to be as straightforward or open again, or even as it was 10 years ago, not to mention before then.
Commerce by definition is meant to be fluid and unrestricted. Money has no politics, it should not have – it is a field of openly traded risks & returns. Hence, a real race is on in every global market to find possibly untraditional, less constrained innovative and secure ways to do international business legally, securely and profitably.
Much was discussed at this gathering, which included executives from Vietnam, Ukraine, Australia, Russia, Burma, Korea, Cambodia, America, Canada, India, and the list goes on. One of the major issues were the trade and investment restrictions unilaterally led by US foreign policy and by extension the US Dollar, which are expected to become even more constraining over time.
Hence the very real and attractive role for cryptocurrencies and the blockchain when backed by tangible asset projects like property, infrastructure and enhancing actual business development.
There were and are a number of instances where banks declined to move US Dollars to one or another directed area, despite long standing bank/client business relationships. The reality of asset freezes, currency seizures and other similarly restrictive measures are expected to become the growing “new normal”.
In such an environment, any alternatives that can bypass these restrictions to free trade yet meet business and investment requirements, are gaining traction – quickly. Alternatives are not only sought by Russian or other “sanctioned” investors, but quite a few developed as well as developing economies as there is a feeling of seeing the “writing on the wall” of ever greater control pressures coming, mostly from the USA.
In watching the tug-of-war between the US administration and the Federal Reserve a goodly percentage of the executives I talked with are of the opinion that the White House will prevail and the US Dollar will be dropping noticeably before midterm elections.
The reasoning is that neither the US Government, not the US corporate sector can afford an extremely strong dollar when the current administration is deploying a new trillion dollar annual deficit regardless of a “strong” economy. A muscular dollar would make this magical juggling act well-nigh impossible, and would badly impact US corporations which receive nearly 50% of revenues from overseas.
This tension is happening as the US Fed needs the dollar to remain strong enough to attract capital in order for the US to be able to fund its deficits and debt issuance, but not strong enough to put the brakes on the national economy. From outside the USA many feel they are financial hostages to a global reserve currency that is spurred mainly by internal American financial self-interest and not the ebbs and flows of healthy, competitive, unregulated global trade.
Today alternatives are actively analyzed on how best to reduce the financial and geopolitical effects imposed by the United States and the US Dollar. On a macro level for example the EU is examining establishing an economic assistance fund to reduce dependency on the International Monetary Fund and expanding the scope of an EU-centric payment and settlements system to insulate itself from U.S. secondary sanctions over a number of “issues”.
These include the possible sanctioning of SWIFT board members in Brussels by the US as a means of convincing them to “go along to get along”. There have even been discussions between the EU, China and Russia to create a global, blockchain-based financial payment and settlements system that would moderate the United States’ financial stick.
U.S. tariffs and unilateral sanctions will eventually spur Europe to reclaim its economic sovereignty from the United States. This is a slow-moving trend, but one that will have serious long-term consequences for everything from NATO’s evolution to the future of the global financial system.
Far more consequential in the long term would be a European move to team up with other major powers, like China and Russia, on global financial reform proposals that include the adoption of a global blockchain-based financial payment system.
Washington has threatened to sideline Iran from SWIFT as part of its tactics to isolate Tehran from the global financial system. Such an action was briefly discussed back in 2015 regarding Russia as well, and recently noises have been reported that this may become an issue yet again.
SWIFT, however, is a Belgium-based private company subject to EU laws. The United States could still try to sanction individual board members of SWIFT to punish the company for noncompliance, but this would doubtless severely damage faith in the US Dollar and the global financial system — not to mention set off a truly serious international crisis.
Of far greater consequence would be a European move to team up with other major powers, such as China, Russia and possibly several others, on global financial reform proposals that might pave the way to adopting a global blockchain-based financial payment system. This apparently has been a topic of discussion between Russia and China for the past few years although no details have been confirmed.
Additionally, a number of independent banks worldwide are already experimenting with the technology as a way to improve efficiency, enhance security and reduce the cost of cross-border transaction fees.
Among the many implications of such a system is reducing the ability of any one participant like the United States, to isolate a country through primary and secondary sanctions. This would also be yet a further step along the long winding road of global de-dollarization. Over time, such a system would greatly enhance the trading of other currencies, not just the US Dollar.
This may also be the game-changing future for cryptocurrencies by giving them as asset base with which to underpin value (be it real estate, metals or other hard assets), and begin to compete with fiat currencies like the USD.
Change is inevitable, embracing it may be difficult for many, but it has been made easier because of foreign policy, most specifically from Washington that is forcing change by many nations. A quick overview of recent situations is an apt example:
The United States starts a tariff war with China. Japan and Germany jump at the chance to gain market share in China, the world’s fastest-growing passenger car market. The United States imposes sanctions on Turkey.
Germany announces that it will offer economic aid to Turkey, Qatar pledges new investments and a foreign exchange swap line, and Chinese banks provide billions of dollars in new loans to the cash-strapped Turks. Chinese commentators declare that crisis is a great opportunity to integrate Turkey into China’s “One Belt, One Road” strategy.
US President Trump scolds Merkel for buying Russian natural gas through the Nord Stream II pipeline. Merkel then meets with Russian President Vladimir Putin to confirm the pipeline arrangement, and even agrees to aid reconstructing Syria in cooperation with Russia.
The United States imposes economic sanctions on Iran, Western insurance companies stop insuring Iranian oil. China then responds by accepting Iranian insurance on oil imports thereby increasing oil imports from Iran, and shipping the oil in Iranian tankers.
Central to market thinking is the belief that Eurasia/Asia will provide the greatest margin of growth to the world economy as it delivers about three-fifths of the world’s new economic growth. Now add to this the steadily growing blockchain and crypto-currency world, which many feel, is the logical economic and social inheritor of traditional fiat currencies and government structures. It is certainly a way to avoid the worst of the trade and currency transfer blockages imposed on business with greater, and more frequency, but it also forces established institutions to slowly, gradually cede control. Always a worrying period, fraught with knee-jerk reactions and unintended consequences.
Meanwhile within the noise, dust and confusion some companies are taking the necessary steps to find and capitalize on the processes and technologies that allow positive, less encumbered business activity. The Relex model could just as easily be adapted to not only real estate development, infrastructure and the like, but to education, agriculture and the entire business chain of being.
One fact came up which was illustrative, almost 75% of global capital invested in commercial property development is in the Top 10 most transparent countries in the world. That means that projects in countries with low transparency scores are considered ineligible projects for investment – a self-sustaining vicious downward cycle.
What if transparency scores in projects located in developing countries were improved? What if the medium of financing FDI were not limited to a single currency, single policy or payment corridor? Projects like Relex get an increased transparency, sustainability and accountability score, becoming classically eligible for a wider stream of investable capital into their projects. In addition, the door is open to investors worldwide, a freedom enabled by blockchain.
This is a very positive development for investors, in which there is easier capital access, and better access to development projects with a high degree of yield. It is certainly worth the time and effort to examine and keep a sharp eye on such developments as the future of international business access is already happening today.
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of The Duran.