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While the impact of the pandemic inevitably featured in discussions it did not dominate them; continuing the pattern of recent years several sessions once more focused on blockchain. In How Blockchain and Distributed Ledgers can combat fraud Sean Stein Smith, Assistant Professor of Accounting in the Economics and Business department of Lehman College discussed trends with Joey Ryan, Co-Founder and CFO of the bitcoin and digital asset based finance platform Gilded and Roberto Cruz, Latin American SVP of the water and waste management multinational SUEZ.
Ryan noted that digital currencies are now growing at a similar rate to that of the internet in its early stages of development and cited forecasts that by 2030 the volume of international payments will have doubled to US$47trn, while digital currencies will have taken a 25% share of them away from national currencies.
He described stablecoins as “a game changer” that started to take off in a big way last year. Being pegged 1:1 to a fiat currency (the US dollar) allows businesses to use them without the volatility risks that attaches to bitcoin and other digital currencies.
However, current legacy systems don’t support cryptocurrencies. Techs such as Gilded are responding by providing a business application layer that enable companies to start using them.
Cruz addressed the uses of blockchain in treasury, which he said gave treasurers “a fighting chance” of keeping fraud perpetrators at bay. In addition to ID fraud prevention, blockchain could be utilised for payment remittances, know-your-customer (KYC), auditability and reconciliation.
At the same time, Salmon Software owner John Byrne last year succinctly expressed the reservations that many still have: “If you ask any corporate treasurer would they use blockchain as an alternative, you would fit their response on the back of a stamp – they’ll avoid it like the plague.
“It has no resonance at the moment in the treasury section where they are taking out big loans, they are going to go with something that they are at least going to be able to wrap their minds around.”
Cruz nonetheless suggests that treasury can usefully leverage blockchain for a wide range of activities and recommended to his audience that they ask what blockchain services are offered by their financial partners and relationship banks. They should also liaise with their company’s IT department and investigate the capabilities of their enterprise resource planning (ERP) system for supporting blockchain technology.
And to evidence its growing acceptance, 11 members of Congress from both main parties recently requested that blockchain was used in delivering Covid-19 stimulus cheques to recipients.
The session Virtual Accounts and In-house Banking Coming of Age in the US brought together Mark Smith, Global Head of Liquidity Products at Goldman Sachs and two treasurers, Lawrence Talep of Volkswagen Group of America and Doug Martin, of the Church of Jesus Christ of the Latter-Day Saints. Both organisations have in-house banks (IHBs). However, the session acknowledged that while virtual accounts have been gaining traction in Europe – as a solution for rationalising bank accounts, driving straight-through reconciliation and enabling on-behalf of structures including IHBs – the US has made rather less progress although both virtual accounts and IHBs are now starting to be more widely used.
An IHB has proved particularly integral to the operations of the Church, which has at least 37,000 congregations across 170 countries and works with 126 different currencies. The lessons that any US corporates should take on board for successfully implementing an IHB are to:
- Carefully identify objectives;
- Choose and plan the right technology providers and arrangement;
- Seek external advice;
- Recognise that tax planning is critical;
- Take a phased approach; and
- Identify the right people resources and ensure they are available