The advent of crypto | TechRepublic

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Long rejected and overlooked by the financial world, digital assets have hit the mainstream. After all, many crypto companies trade publicly on the Nasdaq exchange. Online payment platforms are working on plans to accept cryptocurrency. Governments are investigating central bank digital currencies. And, tellingly, ads that aired during the 2022 Super Bowl featured numerous crypto-focused companies.

The emergence of multiple blockchain platforms means increasing speed, efficiency and interoperability of digital assets amid declining transaction costs. Crypto and its many uses may soon infiltrate all industries thanks to applications and smart contract use cases ranging from vaccine passport apps to voting technology to supply chain management.

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Why prioritize crypto now?

Executives have more choices than ever to leverage digital assets, smart contracts and programmable money – now is the time for companies to envision re-platforming their contracts in digital form. But what does this mean in concrete terms for your industry? Why should you care? And what should you do? What is the downside of waiting?

Innovative companies are no longer theorizing about a hypothetical world of crypto and smart contracts. Business leaders create strategic roadmaps for crypto-based investment opportunities, operational improvements and payment methods.

Three ways businesses should think about crypto and smart contracts

Enterprise C-suite executives should consider crypto from all sides. Here are three principles.

Diversify the balance.

More companies are looking to digital assets and cryptocurrencies to diversify corporate balance sheets.

Example: In August 2020, MicroStrategy, the publicly traded maker of business intelligence software, started converting cash to buy large amounts of bitcoin. MicroStrategy President and CFO Phong Le explained the company’s decision.

“Global macroeconomic, monetary and digital evolutions have converged, forcing all forward-thinking companies to consider alternative assets on their balance sheets, Le said.”

There are both financial and strategic considerations for companies looking to add digital assets to their balance sheets, including the ability to:

  • Capture asymmetric risk return
  • Hedge against fluctuating fiat currencies
  • Embrace modern, open technologies as part of the overall business strategy
  • Improve an operational strategy to accept digital assets as payments

Our perspective on companies investing in crypto further explores adding digital assets to a corporate balance sheet.

Enable cryptocurrency payments

Today, the most popular entry points used by businesses are the use of digital assets to facilitate cryptocurrency payments such as bitcoin. It requires a limited number of customizations for all business functions and can reach a new customer base and grow the volume of each sales transaction. A hands-off approach allows the firm to transact between crypto and fiat currencies to receive or make payments without touching them. Companies that adopt this limited use of cryptocurrencies typically rely on third-party vendors and keep cryptocurrencies off the books.

Another option is to go beyond enabling crypto payments and enable cryptocurrency adoption within operations and broaden the treasury function using a hands-on approach. This route may provide more opportunities and benefits for businesses, but is likely to have more technical difficulties. The hands-off and hands-on approaches to using crypto for payments are further discussed in the rise of the use of cryptocurrency in business.

Re-platform with smart contracts

Smart contracts are the next step in blockchain’s progress from a financial transaction protocol to a universal utility.

Smart contracts use consensus protocols to automatically implement the terms of multi-party agreements, automating or eliminating frequent, manual or duplicate transactions between parties. Smart contracts can reduce auditing, reconciliation and legal reviews, as all parties agree on the code – which represents the rights and obligations – behind the digital transaction. The resulting transaction is more transparent, accurate and faster. And smart contracts require fewer intermediaries, lowering execution risk and transaction costs.

Here are some examples of smart contracts by industry.

Financial services Life science and healthcare Media and entertainment production Cross-industry
Trade Clearing and Settlement Electronic medical records Royalty distribution Supply chain source and funding documentation Execution of transfer pricing agreement
coupon payments Access to population health data Product management and history Peer-to-peer transactions
Processing of insurance claims Tracking Personal Health To vote
Loan Eligibility Validation

Learn more about smart contracts in Deloitte’s perspectives.

What’s at stake

A tech company that isn’t considering smart contracts yet runs the risk of falling behind. At the very least, you should explore crypto opportunities to see how they can benefit your business or industry. Reach out to your organization’s leaders to identify opportunities to digitize or re-imagine commercial operations using smart contracts. Crypto is more inclusive, moving at a greater speed and offering greater transparency than ever before – all signs that it is moving towards mainstream adoption. Are you on board?

To learn more about companies leaning towards Crypto, join us for our September webcast by registering here.

This post is written by Paul Silverglate, vice president and leader in US technology sector, Deloitte & Touche LLP, and Rob Massey, leader in global and US fiscal blockchain and digital assets, Deloitte Tax LLP. Check out our Blockchain & Digital Assets solutions for more information.

This publication contains general information only and Deloitte does not provide accounting, business, financial, investment, legal, tax or other professional advice or services through this publication. This publication is not a substitute for such professional advice or services, nor should it be relied upon as the basis for any decision or action that could affect your business. Before making any decision or taking any action that could affect your business, you should consult a qualified professional advisor. Deloitte is not responsible for any loss incurred by persons who rely on this publication.

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