Blockchain is entering its institutional era. And the company’s treasury function is all about innovation.
For example, news broke this week that business software maker MicroStrategy, whose business mission includes buying bitcoin, sold 13.6 million shares, explicitly tapping the public markets in order to finance d other purchases of the nominal digital asset.
According to a filing by the United States Securities and Exchange Commission on Monday, November 18, MicroStrategy acquired approximately 51,780 bitcoins at a cost of approximately $4.6 billion between November 11 and 17.
MicroStrategy also announced Monday that it would offer for sale an additional $1.75 billion of its 0% convertible senior notes due 2029 to fund the purchase of more bitcoin.
The company currently holds around $30 billion worth of bitcoin on its balance sheet.
While November must have been an exciting time for MicroStrategy’s treasury team and headlines recall the moves by companies like Tesla and Block with their own digital asset-rich balance sheets, treasurers and financial executives at today are separately discovering for themselves that blockchain technology holds several key applications in corporate finance as a technology – not just as an asset class.
With real-time transparency, reduced costs and streamlined operations, blockchain is reshaping traditional treasury practices. For corporate treasurers navigating a global economy defined by uncertainty and complexity, blockchain technology offers a compelling promise: a transformation of the treasury function from a cost center to a strategic enabler.
Learn more: Why banks might want to have a Blockchain strategy
Key applications of blockchain in corporate finance
Five of the most promising uses of blockchain in corporate finance include streamlining cross-border transactions, real-time liquidity and cash flow management, trade finance innovation and supply chain, as well as optimizing risk management, for example by symbolizing reality. -global assets.
The traditional system of cross-border payments – fraught with inefficiencies, high fees and multi-day delays – has long been a sore point for corporate treasurers. Transactions often pass through a maze of correspondent banks, each adding cost and time to the process. Blockchain technology disrupts this paradigm by enabling instant settlements.
“Blockchain technology, and public blockchains in particular, open up a number of new use cases, one of which is transferring value…from one country to another,” said Raj Dhamodharan, executive vice president of blockchain and digital assets at Mastercard, at PYMNTS.
When it comes to cash flow, managing liquidity across a network of subsidiaries, bank accounts and currencies traditionally requires a mixture of guesswork and late reporting from the finance function. Blockchain is a game-changer by providing treasurers with real-time visibility into cash positions across the organization and enabling them to make more accurate financing and investment decisions.
“In five years, we could have a blockchain or state machine that allows financial institutions involved in a transaction to look at this common state and use it as a source of truth to update their own balance sheets,” Tony McLaughlin, head of emerging payments at Citi Services, told PYMNTS.
With instant updates on balances and movements, treasurers can make more accurate financing and investment decisions. Blockchain-based platforms also enable predictive analytics of liquidity needs, allowing businesses to optimize their working capital while minimizing idle cash.
Learn more: Are blockchain-based smart contracts a smart option for global financing?
Towards a blockchain financial future
Although blockchain is not a silver bullet, its applications in cash management offer a glimpse into a more efficient and transparent financial future.
Trade finance, the pillar of global trade, is notoriously complex. Issuing letters of credit, managing compliance and resolving disputes often involves reams of paperwork and significant delays. Blockchain makes it possible to digitize and simplify these processes.
In supply chain finance, which has traditionally favored large buyers with strong credit ratings, blockchain can address traditional imbalances through dynamic discounting and invoice factoring, powered by transactions symbolic.
And in an increasingly volatile global economy, risk management is a top priority for treasurers. Blockchain improves hedging strategies by enabling the creation and tracking of tokenized assets – digital representations of commodities or currencies. For example, a token representing a barrel of oil or a foreign currency can be tracked and traded in real time, giving treasurers unprecedented control over their hedges.
“Larger financial institutions are eager to explore tokenized assets,” Nikola Plecas, head of commercialization at Visa Crypto, told PYMNTS, but noted they need regulatory certainty to do so at scale. .
After all, although the potential of blockchain is evident in a sandbox environment, several major obstacles to its widespread adoption must be overcome. While regulatory uncertainty is chief among them, interoperability and technical complexity are also important challenges to consider.
But the market is moving forward. And forward-thinking treasury teams must keep pace.
Last month, Visa launched its Visa Tokenized Asset Platform (VTAP), which allows banking partners “to create and experiment with their own fiat-backed tokens in a VTAP sandbox.” In a first use case, the platform allowed the issuance, transfer and redemption of a banking token on a blockchain, as well as the interactions of the token with smart contracts.
Last week, Tether launched its own RWA tokenization platform, called Hadron, which allows users to “tokenize anything, anywhere,” including everything from stocks to loyalty points.
In March, BlackRock unveiled its first tokenized fund issued on a public blockchain, the BlackRock USD Institutional Digital Liquidity Fund (BUIDL). The company said last week that it had expanded its offering “enabling BUIDL to be used in leading blockchain-based financial products and infrastructure across ecosystems.”
