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Bitcoin Rebounds: Are Treasurers Taking Notice?

  • By Andrew Deichler
  • Published: 11/5/2015
bitcoinstack1Is bitcoin back? With its value climbing and continued interest in the blockchain, the controversial virtual currency once again appears to be the talk of the payments world—and corporate treasurers are taking notice.

Way back in late 2013 when bitcoin topped out at over $1,100, it was the hottest topic in payments. But after the Mt. Gox debacle just a couple months later, bitcoin’s value plummeted and interest in the virtual currency began to dwindle. While some businesses saw value in accepting bitcoin payments, most companies thought it wiser to avoid a currency that could experience such drastic fluctuations.

Fast forward to today, and the sentiment may be changing. Bitcoin’s value has been climbing; a month ago, a single bitcoin was worth over $200, but it is now over $400. Vox noted that so far in 2015, venture capitalists have invested $468 million in bitcoin startups, more investment than any other year. Additionally, users are performing more bitcoin transactions that ever before. Usage has particularly surged in Europe, where payments systems continue to be localized and disjointed, despite the presence of the euro.

“The idea is now at the forefront of every financial institution, every corporation, every media outlet,” Bobby Cho, director of trading at New York-based exchange ItBit, told The Wall Street Journal.

The future of bitcoin

Bitcoin looks set to become the world’s sixth largest reserve currency by 2030, according to research by Magister Advisors. But the real reason behind bitcoin’s recent resurgence in popularity is the blockchain— the digital ledger that records bitcoin transactions. Magister Advisors’s survey found that the top 100 financial institutions in the world plan to spend $1 billion on blockchain-related projects over the next two years. Jeremy Millar, who headed up the survey, believes that the blockchain is the most significant advancement in enterprise IT in the last decade. He said in a statement that the blockchain “will become the default global standard distributed ledger for financial transactions.”

Some experts believe that bitcoin and other virtual currencies could possibly play a role in the global push towards faster or real-time payments. “These payments settle in minutes—today,” said Claudia Swendseid, senior vice president of the Federal Reserve Bank of Minneapolis, at the most recent meeting of AFP’s Treasury Advisory Group. “So they are among the fastest payments that we have available. And cryptocurrencies—setting aside the bad actors who are using them—are highly secure. Today, adoption is miniscule. But I wouldn’t be surprised if, in 10 years, adoption is a whole lot greater.”

The International Standards Organization (ISO) has put together a study group to determine whether the ISO 4217 (currency code) standard should be modified to include virtual currencies, Swendseid noted. “You need to have a country authority involved in establishing that code,” she said. “Those codes are very important for lots of processing purposes. People like Bloomberg have come to the ISO and said, ‘We list bitcoin, but we don’t have a standard code. Some people have it as BTC and some have it as XTC, and we want a standard authority to tell us what the standard code should be.’”

Concluded Swendseid: “We wouldn’t be studying these types of things and actually thinking about amending international currency standards if, over time, we didn’t think [virtual currencies] were actually going to go somewhere.”

Keeping control

Whatever the future holds for bitcoin, in the meantime, there are some treasury departments that see a use for the virtual currency. The key is maintaining control over them so that they’re not taking big losses. ChildFund International, a global child development organization, has begun accepting bitcoin donations. “We don’t pay anyone in bitcoin but we do collections in bitcoin,” said Sassan Parandeh, CTP, global treasurer for ChildFund. “It’s very minimal, but the way we look at it is, we will not reject a receipt if it’s paid in bitcoin. So we treat bitcoin no different than we would treat a foreign currency receipt.”

Parandeh noted that a few things must be considered when accepting bitcoin. “If people send us a bitcoin, since we’re not selling a product, we need to assure that a fixed amount is received,” he said. “We will take any amount because it’s just a donation. We have found an intermediary organization, BitPay, that receives the bitcoins and we immediately liquidate it and convert it to U.S. dollars.”

Of course, with a currency that fluctuates as rapidly as bitcoin, refunds could become an issue for an organization that immediately converts the currency after payment. “Our policy is that if somebody needs a refund, we will refund in U.S. dollars the value that they paid us. That’s just a way of covering ourselves, because somebody might give us $20 worth of bitcoins today and six weeks from now it could be worth $850. We won’t do that; it’s the value of the date we liquidate it,” he said.

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