The Role of Digital Currencies in Reshaping International Trade

ABSTRACT

Digital currencies, particularly cryptocurrencies and central bank digital currencies (CBDCs), are playing an increasingly significant role in transforming global trade by enhancing efficiency, reducing transaction costs, and providing alternative payment mechanisms. As the global economy moves toward digital financial solutions, the integration of digital currencies into trade transactions has the potential to reshape traditional financial systems, bypass intermediaries, and streamline cross-border payments. This paper explores the role of digital currencies in reshaping Turkeys international trade, focusing on their impact on trade efficiency, foreign currency exchange mechanisms, financial inclusion for businesses, and regulatory challenges. Given Turkeys strategic geographic position as a bridge between Europe and Asia, its growing digital economy, and its high adoption rate of cryptocurrencies, the country presents a unique case study in the adoption of digital financial instruments in trade. The paper examines how digital currencies, including widely-used cryptocurrencies such as Bitcoin and Ethereum, stablecoins, and Turkeys proposed Central Bank Digital Currency (CBDC), the Digital Turkish Lira, can enhance trade settlement processes, improve transaction speed, and reduce exchange rate volatility for Turkish businesses engaged in international commerce. The study evaluates the potential advantages and risks of using digital currencies in trade transactions, such as reduced dependency on traditional banking systems, faster cross-border payments, and financial accessibility for small and medium-sized enterprises (SMEs). At the same time, challenges such as price volatility, cybersecurity threats, and legal uncertainties regarding cryptocurrency regulations are analyzed in detail. Furthermore, the paper explores the prospective adoption of the Digital Turkish Lira, the ongoing pilot programs by the Central Bank of the Republic of Turkey (CBRT), and its expected implications for trade efficiency, financial transparency, and monetary policy. While digital currencies hold significant potential to facilitate international trade, their adoption in Turkey faces hurdles such as regulatory uncertainty, compliance with international financial regulations, concerns about illicit transactions, and resistance from traditional financial institutions. The findings of this study suggest that while digital currencies present a promising avenue for enhancing Turkeys trade efficiency, reducing transaction costs, and mitigating currency risks, the country needs a well-defined legal and regulatory framework to ensure stability and security. If effectively implemented, digital currencies, particularly a government-backed CBDC, could reinforce Turkeys position as a major trade hub, improve its integration into global digital financial networks, and drive economic growth in the long run.

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