Breaking the mould: how US CFOs are embracing crypto
With big-name brands already accepting digital currency, the next decade is likely to see even more movement towards crypto
With big-name brands already accepting digital currency, the next decade is likely to see even more movement towards crypto
The world of finance is constantly evolving, and the emergence of crypto assets is one of the latest developments. While some may be sceptical of this digital asset, many CFOs in the US are embracing the potential benefits they offer.
Around half of US finance leaders have either used crypto assets for payment for personal transactions (47%), invested in it (51%) or plan to invest in it (49%), according to new research from Sage.
Meanwhile, one in five (21%) of these leaders say their organisations currently accept crypto assets as payment, compared to around 1 in 10 finance leaders in the UK (13%) and Canada (12%). A further one-third (33%) of US finance leaders say their organisation has plans to accept crypto assets as payment within the next year.
This is not only a significant shift in the way companies handle their finances but also a reflection of the changing attitudes towards digital assets. From reducing transaction costs to increasing efficiency, the various ways in which crypto assets are being integrated into the business world might afford a competitive advantage in the future.
Crypto assets like Bitcoin and Ethereum have been making headlines for years, but only in recent times have they become a topic of interest for CFOs. One of the most significant benefits of using these assets in business operations is the reduction of transaction costs.
Traditional financial transactions often come with high fees, especially when dealing with international transactions. Crypto transactions, on the other hand, are often cheaper and faster, making them an attractive alternative.
Steam, a popular online gaming platform, started accepting bitcoin payments in 2016. At the time, high credit card fees were making it difficult for some gamers to make purchases on the platform. By accepting bitcoin, Steam was able to offer a cheaper and more convenient payment option.
Spanish airline Vueling announced it was partnering with crypto asset payment provider BitPay and global payment solutions provider UATP to accept Bitcoin payments by early 2023.
“Small and large corporations, investors and financial institutions are asking more and more questions about how to prepare their treasury and accounting functions for the use of cryptocurrencies,” says Alexander Bant, chief of Research at Gartner.
“Some companies are playing defence in case a major supplier or nation moves to using Bitcoin. Others are playing offence to show customers, suppliers and employees they are ahead of the curve when it comes to holding and accepting cryptocurrencies.”
Another benefit of using crypto assets is the increased efficiency in financial transactions. Traditional financial transactions still often take several days to process, which can lead to delays in payments and other financial processes. With crypto assets, transactions are processed almost instantly, making it easier for CFOs to manage their finances.
Furthermore, some commentators would argue crypto assets offer CFOs greater security and privacy. Crypto transactions are encrypted, making them more difficult to hack or tamper with. This increased security is especially important in today’s digital age, where cyber threats are becoming more prevalent.
Cryptocurrency adoption by US CFOs: statistics and trends
The acceptance of cryptocurrencies by CFOs in the US is growing rapidly. According to a recent survey conducted by Gartner, around 5% of CFOs are currently using or planning to use cryptocurrencies in their business operations. This number is expected to rise to 20% by 2024.
Furthermore, many large companies have already begun to adopt crypto assets in their operations. For example, Tesla recently invested $1.5 billion in Bitcoin and announced that it would soon accept Bitcoin as a form of payment for its products. This move was seen as a significant endorsement of crypto by a major corporation.
Overstock, an online retailer began accepting Bitcoin as a form of payment back in 2014. Overstock’s CEO, Patrick Byrne, has long been a vocal supporter of crypto and believes that it will revolutionise the financial industry.
Another example is Square, a payment processing company founded by Jack Dorsey, the CEO of Twitter. Square has been offering Bitcoin trading services since 2018 and recently announced that it plans to create a new business focused on building a decentralised Bitcoin exchange.
These examples illustrate the growing acceptance of cryptocurrencies by businesses and the potential for their integration into mainstream financial practices.
However, like many emerging technologies, crypto has its drawbacks. Finance leaders name finding the right talent to manage crypto assets and the internal perception of crypto assets within their organisation as challenges to further adoption.
Many people are still sceptical of crypto assets and may not understand their potential benefits. CFOs must be able to educate their employees and stakeholders about cryptocurrencies’ potential benefits and address any concerns they may have.
As many as 84% of finance executives believe holding Bitcoin poses a financial risk to the business due to its inherent volatility, according to Gartner.
The environmental impact of cryptocurrencies is also a concern for some. As of April 2022, the average transaction consumes 2116 kWh of electricity. Such high-energy usage could be mitigated by crypto asset miners using low-carbon energy, or by organisations only accepting less energy-intensive crypto such as Ethereum. But at present, this issue may require extra CFO scrutiny, particularly in conjunction with sustainability targets.
Another huge challenge is the lack of a consistent regulatory framework surrounding crypto assets. Crypto assets are still a relatively new and unregulated asset class, which can make it difficult for CFOs to navigate the regulatory landscape.
Another challenge is volatility. Crypto assets are known for their volatility, which can make them risky investments. CFOs must be careful when using them for business operations and ensure that they have strategies in place to mitigate risks.
With big-name brands already accepting digital currency, the next decade is likely to see even more movement towards crypto assets.
While research suggests CFOs are aware of the challenges this shift is likely to bring, finance chiefs must ensure they – and their businesses – are ready to balance purpose and profit to deliver long-term value from crypto.
To mitigate risks and maximise the benefits, CFOs must have a clear strategy in place; this should include a risk management plan that addresses the potential risks associated with using crypto assets.
Additionally, CFOs should ensure that they have a thorough understanding of the regulatory landscape surrounding cryptocurrencies. They should be aware of any regulatory changes that may impact their use of crypto assets and be prepared to adapt their strategy accordingly.