Like anything else, the use of blockchain technology in international trade is accompanied by some major risks and challenges. One of the most significant challenges in implementing blockchain into international trade is that the government must face, but there are other major challenges. The following content is about the risks and challenges of using blockchain in international trade.
1. Improve the efficiency of cross-border G2G processes
This is because it needs to address interoperability issues at the technical level. It faces both technical and semantic problems. This refers to information transmitted by data. There are several existing and developing platforms that use different types of algorithms and technical interfaces and do not communicate with each other. Therefore, this leads to the "digital island problem"
There are many technical solutions under development, but all of them are in their infancy, which is why semantic problems cannot be actively solved. All this means that the sender, the receiver, and anyone between them cannot interpret the data in the same unified way. This is a serious problem, which may endanger international trade in the long run. That is why different international organizations have set up working groups to study interoperability issues and improve their standards.
In addition, it needs political standardization to ensure a better and more effective regulatory framework to promote paperless trade. However, there are legal challenges in deploying blockchain globally. It requires not only an enabling and strong regulatory framework, but also effective and consistent with applicable laws and responsibilities. This will ensure that access to and use of data is regulated.
2. Legal status of transactions conducted on the blockchain network
This means that there is a need for legislation that recognizes these transactions. This validity can be determined by the electronic signature on the electronic document of any electronic transaction. Several governments have begun to design such legislation. For example, the United Nations Commission on International Trade Law or UNCITRAL has implemented the Model Law on Electronic Transferable Records, but much remains to be done.
This is because there are some specific issues related to legal responsibility and jurisdiction. This will require a technical solution for unlicensed blockchain networks. Another major challenge in the area of legal issues relates to data privacy, in particular the right to be forgotten under some codes. Although this also allows users to have greater control over their data through different mechanisms, it seems to be a priori incompatible with blockchain technology. Observers and regulators believe that there are two special legal issues that may become the promoters of blockchain technology.
Legal codification: its goal is to make the law machine readable, so as to replace the obligations in the contract with digital contract codes or smart contracts.
Legal identification: This will help correctly identify companies around the world.
This change may affect the basic technology of global trade and commerce and the understanding of legal implications. In turn, this will affect the development process of collective solutions that may be designed to deploy the technology. However, when developing an integrated ecosystem that operates on the Internet, legal issues are critical, as this is the appropriate governance method to bring companies together.
It is not only the responsibility of the government and regulators, but also the responsibility of all participants in the ecosystem to seek standardization in the legitimacy, decision-making and regulatory framework.
Everyone should support the deployment of blockchain technology worldwide. Similarly, it is necessary for international organizations such as WTO to take measures to raise people's awareness of the benefits, limitations and challenges of using blockchain technology. This will have a significant impact on global trade and commerce. Only collective and cooperative efforts and initiatives can make international trade more intelligent. Blockchain technology will make international trade look completely different in 10 to 15 years.
In addition, the limited scalability and high energy consumption of blockchain technology due to the size of blocks are the two biggest challenges for wider use of blockchain technology. The new algorithm being developed is not too sensitive to energy, and is separated from the concept of block. It is faster and more scalable, but has no long history to rely on.
3. Related to safety
Although it is advertised as highly resilient to hackers and cyber threats. This is because the distributed characteristics and encryption technology used in this technology cannot be completely protected from such hacker attacks and network threats. In addition, in the long run, technological progress leading to quantum computing may pose a major threat to blockchain technology. For these reasons, developers are trying to find post quantum algorithms, hoping that these algorithms can challenge quantum computing.
4. Keep anonymous transactions
In this regard, some corrections need to be made immediately so that exchanges and institutions that need to comply with the KYC agreement can do this more easily. This will ensure that they comply with the rules and regulations of international trade. If this is not done, fraudulent exchanges may violate international restrictions and deal with suspicious actors. Solutions such as transactions signed by authorized signatories of it departments or customs departments can be very helpful in preventing such undesirable activities.
Despite all these challenges, it is precisely because of the characteristics of blockchain technology that many private and public sectors are exploring and experimenting with the possibility of simplifying trade financing, goods sources and improving customs processes through the use of blockchain. Even financial institutions are trying to find a convenient way to obtain funds and reduce the cost of trade financing. The shipping industry is using this technology to ensure the transparency of cargo transport. Therefore, with such potential, policymakers and governments should encourage the use of blockchain.