Controlling for crypto brings new challenges.
Controllers and other financial executives are finding themselves at the crypto crossroads, pushed by market forces toward Bitcoin and other digital currencies, while fully aware of the operational, accounting, and regulatory challenges that come with them.
This is especially true of companies that have decided to move beyond simply transacting in cryptocurrencies with customers as payment for goods and services, but into actually adopting them as a portion of their treasury accounts and cash reserves.
Since the cryptocurrency rally began last year, several high-profile companies have announced that they are holding crypto in the balance sheet, including companies like MicroStrategy, Inc. ($425 million) and the payment processor Square, Inc. ($50 million)
However, despite these high profile announcements, putting cryptocurrency on the balance sheet remains the exception rather than the rule.
In fact, according to a survey being conducted by the Financial Education and Research Foundation (FERF), only a handful of Financial Executives International members surveyed said that their organization currently invests in any cryptocurrency or plans to do so in the next six months.
Given the relatively undeveloped accounting and regulatory environment around cryptocurrencies, it’s not surprising that so few traditional companies are willing to take the lead in this unfamiliar and uncertain environment. For many, that means looking to each other to develop best practices when it comes to reporting and accounting for digital currencies. In this regard, during its most recent quarterly earnings call, MicroStrategy’s CEO Michel Saylor said that companies are developing best practices on a peer-to-peer basis rather than from standard setters or regulators.
“I've had a number of conversations with management teams and CEOs, and I think they're very interested in what we did and why we did it, the outlook for Bitcoin, and the legal, accounting, regulatory, and execution issues,” Saylor said. “Sometimes I speak with large companies directly but for follow-up for smaller companies, we direct them to all our content on the website, which has been very popular and well received.”
What’s Driving Crypto Adoption? It Depends on How Big You Are
Initial responses from our survey show that, for those few companies that do embrace digital currencies, the reasons for doing so are largely driven by their size. Initial responses show that while a majority of large company FEI members said the move was prompted by “customer demand,” about half of smaller companies said it was driven by the “concerns of senior management.”
Following customers on the crypto journey is especially important for companies in financial services, with MasterCard’s Chief Product Officer Craig Vosburg explaining early this year at an investor conference that digital currency is about offering customers choice. He stated that the company was making choices “[in] the context of our overarching strategy of enabling choice and in consideration of the multi-rail strategy in facilitating choice. And to the extent digital currencies and/or blockchain-enabled currencies become a means of payment that is in demand for consumers and businesses, then clearly those are . . . that's a choice that we would want to explore and support in the appropriate ways with respect to our network so we can continue to broaden the opportunities and options available to consumers and businesses for making and receiving payments.”