Despite its recent woes, cryptocurrency is fast becoming unavoidable — especially for finance leaders.
The alternative digital asset industry had a difficult 2022 dipping its toes in the mainstream, and the past year saw many more of the fears surrounding the industry realized than any of its hyped-up hopes.
But that doesn’t mean the industry is on its way out, and there is potential for chief financial officers (CFOs) to take the lead in taming the cryptocurrency sector’s Wild-West ethos.
After all, the biggest failures plaguing the industry’s 2022 struggles centered around a lack of proper financial and accounting controls, and were generally exacerbated by risk management omissions.
If crypto represents an unstoppable, often volatile, force, then the CFO office and its command of risk management infrastructure and accounting controls may just be the brick wall the industry needs to meet in order to regain and further build trust.
Regulatory Headaches Plague Lawmakers
As cryptocurrency reaches a decade-plus of maturity, lawmakers are struggling to create regulations that strike a balance between limiting the technology’s risk while also unlocking its benefits.
Finding the line between supporting innovation while protecting customers and corporate organizations is difficult given the fast-moving nature of the digital asset’s technology.
CFOs themselves are caught in a similar position.
“As a CFO, we walk this line of either having very robust controls and risk assessments or trying to operate quickly,” Gary A. Vecchiarelli, CPA and CFO at CleanSpark, told PYMNTS in December. “You need to strike that productive balance between compliance requirements and business needs.”
Still, that the alternative digital asset class has been positioned as one day becoming the payment method of choice for many B2B customers means that finance leaders should keep a close watch on the progression of its marketplace penetration.
No business wants to be caught unprepared when met with evolving supplier and third-party vendor payment or billing preferences.
It will be up to CFOs on a case-by-cases basis to determine the risk-benefit analysis of crypto for their particular organization, but as the digital asset industry becomes less of a distant disruption and more of a right-now option, finance leaders must be increasingly ready to assess the value and validity of adopting a digital asset strategy.
Industry Risks Sow Unease
But integrating cryptocurrencies into finance and accounting workflows comes with its own set of migraines.
CFOs will also need to put in place proper controls to effectively leverage the benefits of crypto for their businesses.
While the value blockchain-based currencies can drive opportunities for finance and accounting teams, including replacing today’s commonly siloed approaches to transaction processing and aiding in full, end-to-end transparency across operations, the asset class remains highly volatile and unregulated — adding significant wrinkles to any working capital strategy.
Research in the PYMNTS report “Blockchain Payments: Is Regulation Friend or Foe for Blockchain?” showed that more than half of businesses (52%) cited regulatory concerns as giving them pause around blockchain-based currency adoption.
Controlling the Crypto Space
Stability and regulation are givens for CFOs, and they will need more of both to reconsider exploring the crypto space and match the comfort level of incumbent early adopters.
After all, the role of a CFO in the crypto space is like that of any other segments — making sure the right controls are in place and having the right technology to support them.
“One of the things that we’re focused on and that we pride ourselves on is that we want to bring a lot of the focus that the traditional space has on controls and policies and procedures and systematized controls as well to the crypto space,” Justin McMahan, CFO at crypto trading and lending platform Abra, told PYMNTS last year.
If there is demand within the marketplace, the responsible thing for CFOs to do is ensure their organization has the capabilities to properly and safely integrate crypto payments into their broader workflows.
However, a May survey of senior financial officers by the U.S. Federal Reserve Board showed that distributed ledger technology (DLT) and crypto-related products are either not a priority or a low priority in their organization’s growth and development strategy over the next two years.
Still, even those CFOs determined to keep the crypto asset class at arm’s length may find themselves surprised by the forward march of digital currencies.
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