How Digital Assets Could Reshape The Future Of Corporate Treasury

Digital assets are no longer a futuristic pipe dream in modern economy. With more emerging use cases and an increasingly accepting regulatory landscape, cryptocurrencies are gaining traction in new areas of the market, and corporate treasurers want in.

Yet for finance leaders of the enterprise, adoption of digital assets poses plenty of risks and challenges, not least of all the inability for their current treasury infrastructures to manage crypto in an integrated and compliant way.

In recognition of this pain point, the leadership of digital asset technology firm Custody Digital have launched Ledgermatic, a company positioned to enable corporate treasurers and chief financial officers (CFOs) to manage their digital asset workflows alongside traditional fiat operations.

As Ledgermatic CEO Luke Sully told PYMNTS in an interview, finance leaders are expanding their opportunity to gain value from digital assets. But it may not be smooth sailing ahead. As traction grows, he said, the treasury function will endure a massive overhaul as crypto technology fundamentally changes the way organizations manage and move money.

“We’re not just talking about the digitization of fiat,” he said. “We’re talking about an entirely new financial infrastructure that’s being built based on ledgers.”

Evolving Use Cases

According to Sully, there have been three waves of digital asset adoption among corporates so far.

Initially, businesses began to dabble in crypto with an experimental approach to the technology. Early adopters were placing bitcoin on their balance sheets, for example, or accepting payment in cryptocurrency.

Today, more organizations are moving from dipping their toes into the crypto waters toward diving right in as treasurers identify valuable use cases for the technology.

“You’re starting to see the green shoots here,” said Sully. “As you progress, and digital assets start to integrate into finance, then you start to see companies looking to hedge [foreign exchange (FX)] exposure, or looking to reduce an emerging market currency volatility, by holding digital assets.”

The recent acceleration of central banks’ exploration and development of central bank digital currencies (CBDCs) only adds greater legitimacy to the technology, with Sully pointing to cross-border payments as one of the biggest areas of CBDC disruption — although, he acknowledged, the true impact of this tool is not yet understood.

As adoption grows, however, corporate treasurers are struggling to reconcile an ecosystem in which both traditional fiat and digital asset operations coexist. Finance leaders are lacking the tools and infrastructure to manage their finances in a holistic, compliant and secure way, said Sully, with Ledgermatic hoping to fill that gap.

Embracing A New Paradigm

CFOs and treasurers are becoming more comfortable with digital assets in a variety of scenarios, but the evolution of the industry is continuing. A third wave is on the horizon, said Sully, and it involves some major changes ahead for the treasury department.

“That’s the third phase we see, when you interoperate between digital and traditional assets for liquidity and financing, but also to upgrade and make payment systems much more dynamic rather than static,” he said.

Digital assets can usher in a far more flexible paradigm of capital inflows and outflows, especially when it comes to the legacy 30-day payment schedule in accounts payable (AP) and accounts receivable (AP), noted Sully.

The emergence of CBDCs is only accelerating this fundamental shift in the way corporate treasurers move and manage money. Whether it’s the ability to facilitate cross-border transactions in near real time or bridge the silos in liquidity, digital assets are forcing treasurers to reconsider the traditions of money management.

In a world that embraces an instant, always-on economy, the implications of faster payments to suppliers, instant cash sweeps and pooling, and the shift away from batch payment processing are far-reaching.

Looking ahead, treasurers will be wise to not only become more familiar and comfortable with digital assets, but to prioritize the integration of those workflows into those that exist in the treasury department today. According to Sully, the message is “modernize today so you can integrate tomorrow.”

“This is a future that should be embraced and should be seen as something that can interoperate with existing infrastructure,” he said. “It’s not a zero-sum game.”