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Are cryptocurrencies not only the future of money, but increasingly the money of today?

Acceptance of crypto-currencies/digital currencies is growing, for example:

  • deVere Group’s CEO, one of the world’s largest independent financial advisory organisations, believes “There is increasing global acceptance that cryptocurrencies, such as Bitcoin, are not only the future of money, but increasingly the money of today.” He predicts a value for Bitcoin for $10,000-$15,000 over the next few months.
  • In his July Mansion House  speech, Bank of England governor Mark Carney said that Facebook's new digital currency, Libra, could "substantially improve financial inclusion and dramatically lower the costs of domestic and cross border payments.” He also revealed the central bank could open up access to its balance sheet to new payment providers. 
  • Ripple uses their own cryptocurrency XRF which they call “The digital asset for payments” which offers banks and payment providers a reliable, on-demand option to source liquidity for cross-border payments:
    • banks can source liquidity on demand in real time without having to pre-fund nostro accounts
    • Payment Providers can use XRP to expand reach into new markets, lower foreign exchange costs and provide faster payment settlement
  • Finextra reports “The People's Bank of China is "almost ready" to launch its own digital currency said a senior official Mu Changchun, deputy director of the central bank's payments department. Apparently, the currency will rely on a two-tier system meaning that both the central bank and commercial financial institutions can issue it. Blockchain technology will be used but not exclusively.”

Impact on corporate treasury 

The increasing acceptance of cryptocurrencies raises many questions for the corporate treasurer:

  • How should corporate treasury cope with the new money?
  • Can you hedge a cryptocurrency? 
  • Are your payments safe using a cryptocurrency?
  • Can cryptocurrencies be used to avoid cash being trapped in a country?
  • Will there eve be just one truly global currency?  
  • Will the USD lose its central in global finance? The Guardian reports that “Bank of England governor says stockpiling dollars has become a barrier to global trade.” And the sees the potential for a global cryptocurrency - see.

CTMfile take: Cryptocurrencies are here to stay and will be used increasingly. How should corporate treasury departments take advantage of the new opportunities and avoid the pitfalls? What are your key questions?

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