While bitcoin and other cryptocurrencies favor anonymity for wealth preservation, a transparent currency is required for use in real-world commerceDespite the growing fervor and interest around cryptocurrencies the past two years, a large and notable use case for them has been significantly overlooked: that of payments and settlement in real-world commerce, particularly across borders.A recent report from Juniper Research, a leading market research firm, found that while global business-to-business payments totaled $136 trillion in 2017, the overwhelming majority of this activity occurs via traditional legacy payment rails. Further, 93 percent of all cross-border B2B payments were transmitted by banks and financial institutions using “traditional methods.”This demonstrates that despite the explosion of activity and hype around the revolutionary aspects of cryptocurrencies, the majority of technological development and innovation in the bootstrapping world of fintech is being deployed in the relatively small peer-to-peer and consumer markets.So why have cryptocurrencies been unable to penetrate the commercial payments world? The simple answer is that today’s version 1.0 cryptocurrencies lack the key attributes that would allow them to be substituted for fiat currencies or existing financial settlement processes in a manner that risk-averse companies and governments are comfortable with.Transparency vs. AnonymityA core feature of current cryptocurrencies is anonymity, which has long been prized in wealth preservation but less so in legal commerce. This emphasis on anonymity is nothing new and is certainly not without rationale, as the sheer volume of identity-shielded bank accounts and shell corporations that exist around the world for purposes of shielding wealth from the hands of governments or thieves demonstrates. The value propositions of bitcoin and other cryptocurrencies as stores of value runs along similar lines.However, the concept of anonymity is anathema in real-world commerce. Companies need to know who their suppliers are for both financial and corporate citizenship reasons. Should it be discovered that a major retailer’s supplier were to be using child labor or engaging in human trafficking activity, the damage to the company’s brand would be incalculable. Because of this, it is imperative that companies know who the actual identities of the businesses and individuals with whom they are doing business — anonymous and pseudonymous cryptographic hashes will not suffice in this regard. This dynamic will only become more amplified as external pressure builds globally for companies to be more socially conscious. Further, companies equally want to have visibility into who their customers so they can better market to them and manage any associated risks.Also, as the Juniper report highlights, a core-reason that the B2B realm has lagged in payments innovation is because of the risk-averse nature of large organizations - both with regards to aforementioned branding risks but also regulatory risk. Indeed, money transmission and payments are heavily-regulated activities globally precisely because of the risks posed by anonymity. This is why every government on Earth has Know Your Customer and Anti-Money Laundering regimes (some stronger than others) in place. Regulators have not been shy when it comes to levying enforcement actions against financial intermediaries that facilitate potentially illicit transactions. Put it all together, and the risk of non-compliance with these regimes simply outweighs the potential benefits of embracing new forms of payment innovation at this point in time.Enter BridgecoinFor these reasons and others, it is unlikely that cryptocurrencies will be adopted at a meaningful scale in their current form for technical, regulatory, and practical reasons.Yet, there is an opportunity to extend the current value transfer process beyond just a simple ledger of value. A substantial amount of information is lost in any financial transaction using existing processes. This is a major driver of accounting inefficiencies that creates counterparty risk and injects substantial risk into the broader financial system. There is a need for a new type of financial network that can mitigate this risk and reduce information loss. The result is not just a network that enables the trusted transfer of value, but one that increases trust in the commercial value chain between individuals, organizations and their governments.Through blockchain and cryptographic protocols, it is now possible to create an informationally transparent currency that is faster, cheaper and more efficient than existing alternatives; facilitates privacy and enables governments and regulators to protect citizens and mitigate risks posed by bad actors. Such a currency could be used as a substitute for cash yet still be subservient to the monetary policy of nation states. It would be a stable asset-backed currency that increases liquidity, reduces friction, and lowers risk within the system as a whole and to each entity using the currency.Sweetbridge’s Bridgecoin is designed to fill such a role by fulfilling all three requirements of a functioning currency (medium of exchange, store of value, unit of account) AND three requirements that, while not inherent to the nature of money, are demanded by modern governments and regulated financial systems: Know Your Customer processes, Anti-Money Laundering provisions and transparency of identity for proof of ownership, tax or criminal investigation purposes.In this way, it is designed to be a ‘bridge’ between existing legacy payment systems and cryptocurrencies by incentivizing use and adoption by governments and organizations that are too risk-averse to deal in cryptocurrencies directly.Forth Rail Bridge in South Queensbury (photo credit: Wikimedia Commons)From an accounting perspective, Bridgecoin is designed to function as a ‘cash equivalent’ by Generally Accepted Accounting Principles and International Financial Reporting Standards definitions so that it can be held on a company’s balance sheet as cash. Specifically, it is highly liquid and can be converted to fiat currency within five business days with minimal fluctuations in value. Therefore, using the Sweetbridge Liquidity Protocol, Bridgecoin is used to extract value out of assets and convert that value into a highly liquid digital currency that meets all criteria of a cash equivalent.What can a holder do with Bridgecoin once it has been minted against an underlying asset? It can be used to either purchase cryptocurrency, convert to fiat currency or for payments using the forthcoming Sweetbridge Settlement and Accounting Protocols.Find more details on our Bridgecoin currency in our whitepaper for global supply chains, and stay tuned for our forthcoming Digital Transparent Currency whitepaperAbout SweetbridgeSweetbridge is a new economy built for commerce that enhances the world’s current economies. Sweetbridge and its alliance partners offer a unique set of blockchain protocols, applications and crypto-economics to create an economy of opportunity for all participants. The goal of Sweetbridge is to transform brittle, industrial-era commerce through decentralized industry ecosystems that create a faster, fairer value exchange, unleash working capital, better utilize resources, and optimize talent for the benefit of all participants. For more information, follow Sweetbridge on Twitter at @sweetbridgeinc or visit https://sweetbridge.com.Bridgecoin and the need for a Transparent Digital Currency was originally published in Sweetbridge on Medium, where people are continuing the conversation by highlighting and responding to this story.