Bitcoin applications for Corporate Treasurers

bitcoin

People are questioning institutions that have been around for decades or centuries – like a Central Bank, like a fiat currency, or politically motivated institutions.  I’m not qualified to comment on the internals of Bitcoin; I’m neither a programmer nor a computer scientist.

But I do know that Bitcoin exists because of software code and is really just algorithms that equate to digital money.  I also know that fiat money exists because of trust in the U.S. Government, and that trust extends to the US Governments ability to tax its citizens and corporations.

What’s interesting lately has been the Federal Reserve’s reaction to Bitcoin – which is essentially nothing. In Barbara Yellen’s view, it is outside the jurisdiction of the Fed unless their charter is changed.  According to the minutes on the Fed’s website:

"Bitcoin does not present a threat to economic activity by disrupting traditional channels of commerce.  Illicit applications are rampant but not endemic to Bitcoin; sovereign-issued currencies and other precious goods are similarly used."

The collapse of Mt. Gox, once the leading Bitcoin exchange, has been widely covered and documented already. Same is true with closing down illegal traffic sites such as Silk Road.  Suffice it to say speculators like volatility and this can give Bitcoin a Vegas like feeling.  But knowing the amount of venture capital and private equity money pouring into this space, I would not dismiss the Bitcoin hysteria, because I believe digital currencies are not going to go away.

In our global economy, where instant payment is the norm, most B2B commerce is done via credit cards or Paypal.  Having another alternative that does not provide any currency convertibility risk is not a bad thing.  At the 2013 AFP Annual Conference in Las Vegas, I attended a session by Steve Mott titled, “Bitcoin and Other Alternative Currencies, Prospects and Legal Questions", Steve noted “treasurers need to think about potential implications for digital currencies being regulated and what ways Reg-E, OFAC, the Bank Secrecy Act and other regulations apply.”  One of the take-aways was that Corporates have to realize how to support their trading partners if they decide to use Bitcoins.

Bitcoin applications for Corporate Treasurers

I came away with six Bitcoin applications for Corporate Treasurers

  • International Transfers
  • Procurement in “sensitive” countries - particularly if you’re trying to do business with countries that have lots of regulations, currency reporting requirements, and tax implications.
  • Intra company transfers
  • Tax protection events
  • Avoidance of repatriation complications
  • Hedging

It will be interesting to watch developments here.  Even in my home city of Vancouver, we now have a bitcoin kiosk, although I have yet to buy my first Bitcoin.

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