TECHNOLOGY
a spokesperson stressing all the firm’s attention is currently focused on the safety of its people and complying with all sanctions requirements. China’s crypto-ban pulled the rug out from what had been a booming industry. There was much speculation about China’s motivations. Was it down to concerns about financial stability? The unsustainable energy consumption? To curtail financial crime? To prevent capital flight from its markets? Or to protect its own ambitions for the digital yuan? Whatever the real reason, last year’s ban certainly highlighted that crypto is still very much an emerging industry that still carries a certain amount of political risk for investors and users – what analysts at Deloitte call a “frontier.”
TRUST ISSUES ON THE FRONTIER
These new digital currencies only emerged in 2009, and the early years were marked with a certain amount of scandal, with bitcoin – and the many other cryptocurrencies that now exist – too often associated with fraud, money laundering and other criminal activities. Last year, the U.S. Department of Justice seized US$2.3 million worth of cryptocurrency from the DarkSide ransomware operators responsible for the attack on Colonial Pipeline. It certainly doesn’t help that there’s some suspicion that cryptocurrencies are being used by Russians to evade the sanctions imposed following the invasion of Ukraine. “We have taken steps to clearly signal to all those who are exchanging, transacting, offering services in relation to crypto assets that they are being accomplices to circumvent sanctions,” said Christine Lagarde, president of the European Central Bank, after a sharp increase in roubles being used to buy bitcoin and other virtual currencies. Russia has said it is considering accepting Bitcoin as payment for its oil and gas exports in a bid to keep income flowing to its stricken economy and, at the time of writing, large crypto exchanges, such as Binance, were still handling transactions in Russia. Yet it’s also worth pointing out that people
Blockchain A decentralized, distributed, and often public, digital ledger consisting of records called blocks that are used to record transactions.
Crypto-mining New bitcoins are created by solving complex mathematical problems, the first bitcoin “miner” to solve the problem is rewarded with bitcoin. This process also confirms transactions on the network to make them trustworthy.
Bitcoin A decentralized digital currency, without a central bank, that can be sent from user to user on a peer-to-peer bitcoin network.
Stablecoins a class of cryptocurrencies that are pegged to a stable real-world asset, like the U.S dollar or gold, in an attempt to offer price stability.
GLOSSARY
around the world have donated tens of millions of dollars’ worth of cryptocurrency to help the Ukrainian government and people in their fight for their country, demonstrating how this relatively new financial infrastructure enables speedy cross-border transactions.
CORPORATES STILL WARY
Given its decentralized and unregulated nature, it’s hard to estimate how much of the world’s wealth is held in crypto, but there’s no doubt it is big and getting bigger. Even so, this is still very much a fringe payment option that few corporates have yet to plan for, despite there being some clear efficiency gains. In late 2020, it was estimated that more than 2,300 companies in the U.S. were able to accept bitcoin as a form of payment, but the list of florists, coffeehouses, massage parlors and small law firms suggests the currency has some way to go before it breaks into the large corporates space.
“Companies venturing to use crypto in their businesses should have two things: a clear understanding of why they are undertaking that action and a list of the many questions they should consider,” said analysts at Deloitte. The corporate benefits include enabling access to new capital and liquidity pools through traditional investments that have been tokenized, facilitating real-time and accurate revenue-sharing and enhancing transparency to aid back-office reconciliation. Crypto payments can also enhance a host of more traditional Treasury activities, such as simple, real-time and secure money transfers, strengthen control over the capital of the enterprise and managing the risks and opportunities of engaging in digital investments. What’s more, crypto may serve as an effective alternative or balancing asset to cash, which may depreciate over time due to inflation. This is particularly pertinent now, given fears www.breakbulk.com
BREAKBULK MAGAZINE 57
