Imagine this future. The year is 2017, the currency tussle between many of the world's largest developed economies has escalated into full-scale war (evidenced by extreme government intervention in monetary policy and various currency easing projects), and consumers and business owners in both developed and developing economies finally say: "enough is enough, we want a fairer playing field free of extreme inflation and currency wars, which erode pricing power and unfairly disadvantage people in countries with fewer monetary levers to pull."
Cryptocurrency!
A few weeks ago I discussed the potential for one of many cryptocurrencies to offer an alternative to fiat currencies like the US Dollar, British Pound or Australian Dollar. I said that the impact on banks could be huge, but what other companies might be impacted?
What can you do with cryptocurrency?
Cryptocurrency is traded on an exchange much like 'regular' currencies and can be exchanged for goods at many major online and bricks and mortar (US) retailers like Amazon, Ebay, and Best Buy, while a larger number of smaller independents have embraced the currencies. Seemingly in Australia there's a growing list of small and larger retailers that allow payment by bitcoin, or similar currencies.
What impact will it have on the ASX-listed companies?
Could we see a future where global stock exchanges are combined on a single exchange, listed in multiple digital and physical currencies? Or perhaps a new digital-only exchange will be created that appeals to online companies for IPOs. These scenarios would impact exchanges like the ASX Ltd (ASX: ASX), but also companies like Macquarie Group Ltd (ASX: MQG) that help with listings.
In my view, there's the potential for a digital currency, or multiple currencies, to create an ecosystem whereby users would be rewarded for using the currency in partner stores (who would also accept the currencies). This would be similar to any of the many reward systems being used currently, but could be much simpler as it would always be administered at the checkout. Being a first mover could have a significant impact on revenues for groups like Retail Food Group Limited (ASX: RFG), Myer Holdings Ltd (ASX: MYR) or Premier Investments Limited (ASX: PMV).
Of course, it could also provide massive companies like Apple or Google the ability to extend their ecosystem by bringing currency inside their service offering. Either way, I expect that it'll be tough for one digital currency to become the reserve currency, but rather a number of major currencies will become an online 'norm'. It'll be interesting to see what impact this has on our portfolios and interest rates going forward.
