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Planning Ahead: What Role Will Cryptocurrency Play in Treasury?

By May 13, 2021No Comments

As cryptocurrency takes flight, market maker B2C2 teams with NeuGroup to shine a light on this new world.

More than half (52%) of the members at a recent NeuGroup meeting said they expect cryptocurrency to become a regular part of day-to-day treasury activity. To help get members up to speed, NeuGroup teamed with sponsor B2C2, a leading crypto liquidity provider, and other industry leaders.

  • Rob Catalanello, CEO of B2C2 USA, said, “There is a pretty big groundswell of interest from the institutional world, and by that I mean the very well-known names, who are looking into it for a variety of reasons. Either as a form of payment, as a store of value or just trading in a new asset class.”
  • Members from several NeuGroups attended the meeting, and expressed curiosity regarding how corporations may use cryptocurrency—but very few said they actually have hands-on experience (see chart below).

OTC and KYC. B2C2 aims to make cryptocurrency trading more private by providing an over-the-counter option for corporates looking to make relatively large trades without moving the market as they might on an exchange (see our story on Square).

  • Addressing concerns about the security of cryptocurrency trades, Mr. Catalanello said B2C2’s extensive KYC process enables the company to “only send coins to, or receive coins from, wallets where we know the beneficial owner of the wallet. We don’t send co-mingled, third-party or exchange wallets.”
  • “It’s not the Wild West,” Mr. Catalanello said . “But at the same time, it’s important for people to understand the market structure before they jump into it. There are a lot of people out there pretending to be things that they’re not. We encourage people to do the proper due diligence before getting involved.”

Beyond bitcoin. In a brief overview of the crypto market, Brian Kelly, CEO of BKCM, a digital currency investment firm, said he views bitcoin as similar to an S&P 500 index fund—an entry point into the larger world of crypto. “Bitcoin gets you into the space and provides general beta exposure,” he said.

  • But bitcoin alone is just the first step. “Then you have the alt-coins…that would include Ethereum,” he said. “These give you exposure to everything else that is going on, like DeFi and Web3…all those crazy things [people] talk about.”
  • Ethereum is a blockchain developed to support scripting and applications, which includes a native token called ether. DeFi, short for “decentralized finance,” is a term for financial apps built on top of Ethereum that cut out financial intermediaries; and Web3 is a collection of libraries, also built upon Ethereum, designed to become a privacy-focused evolution of the internet.
  • Mr. Catalanello stressed that bitcoin and ether aren’t the only coins in the market. “Stablecoins probably have more potential for actual payments, whether it’s B2B or B2C,” he said. “I would say it would be much easier to adopt any one of the stablecoins that are currently in the market,” he said.
    • A stablecoin is a type of cryptocurrency that aims to counter the high volatility of crypto assets like bitcoin by tying the token’s value to other assets, including sovereign currencies.

Bitcoin chicken and egg. One member at the meeting who has a growing direct-to-consumer business said he is most interested in accepting cryptocurrencies as a form of payment, which many members echoed. “It does feel like, in our initial research, the processing companies are in the process of accepting digital currencies as a form of payment and then settling with the end merchant—so, us—in US dollars,” he said.

  • “There is no direct demand from consumers at this point, but it’s one of these double-sided chicken-and-egg issues at this point,” said another member. “For it to be worthwhile for a business, you need the consumer to need there to be acceptance before you can really put it in place.”
  • One treasurer at a retail company said he isn’t quite ready to take any actions in the crypto space, but he thinks “inevitably it’ll be used in terms of payment acceptance from customers.”
Justin Jones

Author Justin Jones

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