It’s Time For CFOs To Pay Attention To Cryptocurrency
Cryptocurrencies—Bitcoin, Ethereum, Dogecoin, etc.—will likely be around for a while as businesses grow more open to accepting them. Research and advisory firm Gartner predicts that 20 percent of large organizations will use digital currencies for payments, stored value or collateral by 2024.
“Increasing mainstream acceptance of cryptocurrencies on traditional payment platforms and the rise of central bank digital currencies (CBDCs) will push many large enterprises to incorporate digital currencies into their applications in the coming years,” says Avivah Litan, distinguished vice president analyst in the Gartner IT practice. “Digital currencies will be primarily used by these organizations for payment, a store of value and the ability to leverage high-yield investments available in decentralized finance (DeFi) applications.”
Gartner recommends that organizations first clarify specific use cases for digital currencies before evaluating how to incorporate them within the enterprise as each primary use case comes with a host of technological, regulatory, legal and strategic considerations for both CFOs and applications leaders to assess. These include selecting appropriate service providers and the ability to monitor and react to ongoing regulatory guidance.
“We have noticed an uptick in interest in digital currency and blockchain applications among CFOs since the start of the year,” says Alexander Bant, chief of research in the Gartner Finance practice. “While volatility of cryptocurrencies remains a concern, anticipation of clearer regulatory guidance, and the advent of CBDCs, now offers CFOs more avenues to pressure-test use cases for digital currencies.”
Gartner’s prediction for wider adoption of digital currencies by 2024 is partly driven by the already healthy environment of service providers and off-the-shelf solutions available to large enterprises that have identified a specific use case for digital currencies.
“Among the primary use cases for digital currencies that we have identified, there will be no need for most organizations to develop a customized blockchain application stack,” says Litan. “Many large banks, payment platforms, institutional digital asset custodians and wallet providers have already done the heavy lifting in this area, which should provide large enterprises with a minimum of friction in deploying their own digital currency applications.”
Bant also points to additional factors that could make digital currency applications more palatable to CFOs in the next 12-24 months, including hedging against the highest inflation in more than 39 years, increased regulatory clarity, improvements in energy usage, and adoption by employees, consumers and suppliers.
“There has always been theoretical appeal in the use of blockchain and digital currencies for CFOs as a means to lower costs, increase transaction processing speed, reach new global customers, move toward continuous accounting and auditing, and create an error-free and fraud-free environment,” adds Bant. “Now, with Congressional oversight starting to develop and the potential for more central banks to join China in launching a CBDC, we can see a path where the use of digital currencies will be potentially more predictable and stable in the future.”
Bant notes that macroeconomic pressures related to ongoing high inflation, and its impact on fiat currencies, could push more CFOs to explore some digital currencies as a potential store of value for a portion of their reserves.
“2022 is the year that we expect CFOs to rapidly up their knowledge on digital assets, currencies and other blockchain applications. When the CEO and board start asking for the opinion of the CFO, they must have a point of view on the risks and points of differentiation for their organization,” he says “We are starting to see some Fortune 500 companies map out scenarios for how they will respond if a country or supplier moved to doing business with only digital currency and what steps they would take as a result.”