Over 2,300 businesses in the United States were said to accept bitcoin in the second half of 2020. This number is likely to rise as more businesses around the world begin to use digital assets for investment, operational, and transactional purposes. However, this use of cryptocurrencies presents businesses with both opportunities and challenges; consequently, it is essential to have a list of questions to consider as well as a clear understanding of the reasons behind your company's decision.
It is essential for your business to anticipate, prepare, and engage thoughtfully if it plans to participate in cryptocurrency. To assist you with this choice, Deloitte's free report, "Corporates putting resources into crypto: considerations regarding digital asset allocations" provides an overview of the issues and insights that businesses ought to take into consideration when deciding whether or not to use cryptocurrency.
Cryptocurrency is currently being used by some businesses for a number of reasons, including enabling programmable money to share revenue in real time, opening doors to new demographics, raising internal awareness of this new technology, opening doors to new asset classes, new sources of capital and liquidity, and opening doors to new demographics. Additionally, crypto can enhance traditional Treasury functions and serve as a viable cash-alternative asset.
It is essential to select the option that is compatible with your company's objectives and carefully consider the advantages, disadvantages, costs, risks, system requirements, and other factors before deciding to implement crypto in your business. Using cryptocurrencies can be done in two primary ways: accepting crypto payments or keeping crypto on your balance sheet
One methodology is the "hands-off" technique, where organizations use digital money just to work with installments. By relying on third-party vendors to convert cryptocurrency into and out of fiat currency in order to accept or process payments, the company avoids accounting for cryptocurrency. This strategy is the quickest and easiest way to start using digital assets, and it may help you achieve immediate goals like more sales and more customers.
In any case, organizations that utilization crypto just sparingly should in any case conform to guidelines, including AML and KYC prerequisites and limitations forced by OFAC. Even when employing a third-party vendor, careful consideration of internal controls, compliance, and risk is required. For businesses that choose to go one of these two different routes, the following sections provide some general considerations.
If a company wants to do more than just accept cryptocurrency payments and spread the use of cryptocurrency throughout its operations and treasury department, it may face both significant advantages and technical difficulties. In order to get ready for this "hands-on" approach, the company's treasury must think about the following issues first:
With the use of cryptocurrencies, what does the company hope to accomplish?
The treasury's ability to receive, monitor, and manage cryptocurrency payments is a result of a process.
Is it better for the organization to re-appropriate crypto guardianship to an outsider or keep it in-house, as per the depository?
When considering investing in cryptocurrencies as a new asset class, what measures are currently in place or have been considered?
In light of the possibility of national banks issuing digital currencies, what changes can be anticipated?
Because the company's financing relationships are maintained by traditional treasury groups like banking groups, investment partners, and third-party working capital providers, Treasury will always be a part of these decisions and changes. In a broader ecosystem for digital assets, treasury chooses which banks and financial services companies are needed.
A company can choose one of two paths when embarking on a broader "hands-on" adoption of cryptocurrency:
Utilize the services of a third-party vendor or custodian to maintain custody of the cryptocurrency on a blockchain and provide wallet management services that simplify asset tracking and valuation.
Manage the private keys of the company and incorporate cryptocurrency into its own systems (consulting an attorney to determine whether crypto transmission requires a license).
Today, a third-party custodian is used by the majority of "hands-on" crypto users at businesses. However, self-custody is a more involved and time-consuming option. If the organization goes this route, it will probably be in charge more of the work that supports its exchanges. Businesses that self-custody will also be covered by most of what follows.There are necessary organizational and mental shifts when a company decides to participate in cryptocurrency. Some people think that cryptocurrency is a crucial part of how finance is changing. However, just like with any other technological advancement, putting such a change into action requires a comprehensive implementation strategy. That strategy ought to include the following inquiries, but they are not the only ones:
What is the overall strategy?
What are the short-term and long-term objectives?
Which external and internal partners must participate? Can effective champions for the effort be identified across all relevant company departments?
Will the decisions and actions taken right now allow for future growth and adaptability?
How can the security requirements of operating in the digital asset ecosystem be combined with existing security and cyber efforts?
How does the company intend to implement cryptocurrency? Will it involve "hands-on" activity or a "hands-off" strategy based solely on payments?
What additional capabilities and resources will the business require?
What will the road map for implementation look like?
How will the business keep track of the implementation's progress? Are procedures in place to monitor vendor performance and transactions?
Before launch, how does the final state look?
Some businesses choose to test the use of cryptocurrency in the same way they would test a new technology before a full launch because this can be a difficult task. Depository typically oversees the company's and its subsidiaries' internal funding, so an internal departmental pilot can be established. The pilot can begin by acquiring some crypto, using it for a few fringe payments, and tracking the payment, receipt, and revaluation processes.
