The evolution of FOREX in the 21st century

words Al Woods

Bartering systems date back to the Mesopotamia era around 8000 years ago, but FOREX trading as a concept is still relatively new and can be traced to the Bretton Woods System that fixed international economies to the US dollar, or, more accurately, the Gold Standard.

The free floating market, however, is far more reminiscent of today’s FOREX market, and though it’s been around since 1972, it was only during the late 90s and 21st century that we have seen the huge influx in trading that has positioned FOREX as the world’s largest market, seeing trades exceeding $5 trillion every day.

The Introduction of Fintech

The development of FOREX occurred primarily in the 20th century, but the markets didn’t reach trillions in trading per day (5.3 Trillion USD) until the 21st century. This was due to policy adoption of technological potential and the evolution of FinTech.

Specifically, it was due to the arrival of both FinTech 2.0 and, more recently, 3.0/3.5. These eras of FinTech have brought about online banking, the Single European Act, the UK’s Big Bang Movement, and, more recently, the arrival of person-to-person FOREX trading. This transformed the FOREX market from something only a few brokers could accomplish to something everyone can partake in.

Impact of Future Policies

Policy change has historically had a direct impact on the health and scope of FOREX trading. The Big Bang, a notable policy change that set London as one of the global financial capitals in the world, is one such example. Having an understanding and timeline of how government policies have impacted the FOREX markets throughout their history is a great way to prepare for future changes. One such change in the immediate future is Brexit, whose process has frustrated a variety of markets and industries. Depending on the outcome the future of FOREX, or at least the future of London as a financial capital, is likely to change drastically.

Cryptocurrencies and Blockchain

Governmental policies are not the only driving force behind change in the FOREX industry. Just as FinTech resulted in huge changes and improvements throughout the 21st century so far, Cryptocurrencies and Blockchain will take the industry further. The concept of a digital currency is huge, but more than that, the potential of Blockchain is set to revolutionize the efficiency and security of FOREX markets completely.  

The Future of FOREX

The future of FOREX lies directly in the adoption of new technologies and regulations set out. Currently, several markets, like China, have barred FOREX trading with the exception of personal exchanges, and even then these are limited on a yearly basis.

Were China to formalize and regulate the market in a way that allows for FOREX trading by brokers and firms, it stands to reason the market would skyrocket. Of course, due to the online nature of most FOREX trades, many brokers are operating in the so-called gray area. How their activities are received are still to be determined.

Individual markets and government policy, combined with new, user-friendly and more secure tech, will greatly impact the future of FOREX and the lives of everyone around the world.


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