More and more companies are wondering whether it is a good idea to use cryptocurrencies in general, and bitcoin in particular, in the company's treasury.
Learn the advantages and disadvantages of using cryptocurrencies in the company's treasury.
Learn about Tesla's fleeting experience with cryptocurrencies.
The history of cryptocurrencies is relatively recent, as the first bitcoin was born on January 3, 2009. Although they are now better known as highly speculative assets, their initial purpose was to create a digital means of payment to facilitate exchange.
By relying on blockchain technology, cryptocurrencies make it possible to secure transactions, control the creation of additional tokens and verify asset transfers. Cryptocurrencies enable the internet of value, also known as IoV (internet of value). They are facilitating the exchange through online financial platforms without using financial intermediaries.
Advantages of using cryptocurrencies for companies
Among the benefits of using cryptocurrencies in companies, we can highlight the following:
They have reduced transaction costs.
Transaction traceability. Operations carried out in cryptocurrencies are traceable.
Security. Breaking the security of a cryptocurrency is almost impossible as long as quantum computing does not yet exist. Therefore, there is no possibility of counterfeiting.
Elimination of financial intermediaries. The buyer and seller transfer cryptocurrencies directly to each other without the need for intermediaries (Peer to Peer, P2P).
Speed of payment execution. In cryptocurrency payments, the delay is a matter of minutes, while the transfer of currencies can take days.
Once you make a payment, it is irreversible, providing security to its users.
Privacy. You can operate without revealing your identity.
They are exchangeable for other currencies. You can exchange cryptocurrencies for other currencies.
Problems derived from integrating crypto in the company's treasury
The main issues of integrating cryptocurrencies into the company's treasury are their lack of regulation and their use primarily for speculative purposes. Many Central Banks warned of their extreme volatility, complexity, and lack of transparency in cryptocurrencies, making them a high-risk bet.
The banking supervisor and the market regulator have also warned that the rise in the price of cryptos such as bitcoin and ethereum has been accompanied by a significant increase in advertising, sometimes very aggressive, to attract investors. Moreover, their leading utility could be to facilitate imports and exports. Still, the dollar is putting up a fight and, for the time being, remains the predominant currency in global commodity trade.
The advantages of using cryptocurrencies for companies are privacy, security, and speed in making payments.
Tesla and bitcoin: now yes, now no, and tomorrow maybe
On March 24, 2021, Elon Musk announced that Tesla had already accepted bitcoins as a payment method to purchase its vehicles. What seemed to be the explicit endorsement of bitcoin and other cryptocurrencies was soon overturned. On May 13 of that same year, Elon Musk announced that they were no longer accepting cryptocurrency. The reason given was the increasing use of fossil fuels for the mining process.
However, shortly after, in June 2021, he said that he still plans to accept bitcoins soon, precisely when miners use less polluting energies. On January 14 of this year, Elon Musk announced, also via Twitter, that he has begun to accept, albeit with conditions, dogecoin (the currency of the little dog) for the purchase of accessories for his electric vehicles. And all this, at the stroke of a tweet, while the bitcoin price rises and falls in a dizzying way and the dogecoin moves its tail by raising its price thanks to a tweet.
What's behind Tesla's change of heart?
Although Tesla's announcement initially opened the door to accepting business transactions in cryptocurrencies, its subsequent indecision and lack of definition, rather than paving the way, generates confusion and insecurity in the face of using cryptocurrencies in the company's treasury.
Therefore, integrating cryptocurrencies into the company's treasury is a very risky bet. Perhaps a little less than betting the company's money in a casino. But as long as cryptocurrencies continue to have such a high speculative component, which can even mean the total loss of the investment, they are not recommended for use in the company's treasury.
And answering the headline's question, cryptocurrencies today are not a reality in companies' treasury. But, probably in the future, they can find a niche, provided they lose volatility and become a stable currency without such a speculative nature as the current one.