“Most revolutionary disruptions come at you unexpectedly and Bitcoin (BTC) has certainly done that in recent times,” said Jon Matonis, executive director of the Bitcoin Foundation.
The potential of Bitcoin and other crypto-currencies like Ripple to enter the financial supply chain of treasuries and the correspondent banking model was discussed by Matonis and Jonas Borchgrevink, the founder of Coinaaa in Norway, which as he explained is supplemental to Bitcoin. Coinaaa enables the exchange of BTC and real currencies and allows value to be stored in cryptocurrencies mined as a hedge against fluctuating market prices.
An explanation of Bitcoin was given by Matonis as he detailed its invention in Japan in 2009 and the way that an algorithm has to be cracked to mine the cryptocurrency to release a unit of value. “There is a finite amount of coins available up until 2040,” he explained, and Bitcoins can be used electronically in a block chain scenario to transfer value electronically around the world.
Increasingly large corporates such as Virgin Galactic, Dell and others are accepting Bitcoin and other cryptocurrencies, suggesting that corporates may eventually have to include BTC in their FX hedging and other treasury activities – if they don’t leave the value in the volatile cryptocurrency.
“Most corporates automatically change BTC into US dollars after accepting it,” said Borchgrevink, who added that he expects to see more and more firms accept cryptocurrencies in the future as its popularity rises. Ecuador is also creating its own cryptocurrency at the moment and he expects to see emerging market adoption motor ahead of the developed world’s usage of such coins.
What Does it all Mean for Treasurers?
There is naturally some scepticism in these early days of the disruption about fluctuating value; the famous hacking of the Mt Gox BTC exchange; and the legitimacy or otherwise of cryptocurrencies but it is a fact that more firms are accepting it and its popularity continues to grow.
“I look forward to Bitcoin exchanges being regulated in the future – the currency itself is market-tested and protected by that,” said Matonis, who added that he believed it would continue its move into mainstream treasury, banking and financial circles.
Treasurers themselves aren’t perhaps so sure. The Treasury Verdict live polling result from 1,800 EuroFinance attendees showed that only 7% of the treasurers at the show have so far been asked to pay/or to receive payments in a cryptocurrency. Fully 93% still haven’t had any practical experience with such a currency, illustrating it may still be a few years yet until Bitcoin and its ilk reaches the mainstream.
While many still think the banking sector is characterised by legacy systems and lack of innovation, this could not be further from the truth. 2018 marks the year when a multitude of external factors will shake up the industry once and for all and reinvent the way people bank. Inevitably, this presents a threat, but also an opportunity.
The Indo-US trade corridor is expected to grow to $500 billion by 2025. Currently, the two-way merchandise trade between these two countries is at $66.7 billion.
Cryptocurrencies have developed and matured in to an entirely new class of asset. Completely digital and constructed using blockchain technology, they are a genuine, game-changing means of raising capital for the funding of new and existing businesses alike.
There has been an uptick of treasurers inquiring about interest rate risk management in recent months as interest rates in the US and UK have started to show a rise in momentum, said Chatham Financial at the annual Bellin treasury conference.