The recent SEC decision on the ETF for the Winklevoss Fund had several communities around the world abuzz and bought to light Bitcoins and “altcoins” . Ever since its inception in 2008, Bitcoin the peer to peer digital currency has steadily grown into limelight. Importantly the underlying technology of Bitcoin, ie Blockchain has numerous spheres in the Business community excited of its potential to cause major disruption in the way we do business.
The digital revolution has also ushered a new growth in digital payments
- Growth in ecommerce leads to growth in online payments
- Solutions such Payment wallets allows ease of use
- Accessibility of smartphones and mobiles phones has increased
Whilst Enterprises have geared up over the years to adapt to digital payments and now looking at the endless opportunities of Blockchain , the question is have they addressed the elephant in the room ie Digital Currencies?
The interest in Digital currencies is occurring in several spheres. They have now become an asset class in themselves. Central Bank of China has recently piloted a digital currency showcasing interest in government spheres. There has also been a steady increase in Bitcoin merchants over the years
Here are few factors enterprises need to consider for leveraging digital currencies
- Digital Currency Evaluation – unlike FIAT currencies like USD , GBP etc where assessment is based amongst other things macro-economic factors, digital currencies need to evaluated on technology basis to assess which digital currency may be suitable
- Validation Architecture -These include the approach of validation to conduct transactions applied with view to secure the currency. For eg Dash applies Master Nodes whereas Bitcoin does not use that
- Scalability– This refers to the avg transaction time and number of transactions that can be carried out by the currency network. Eg Ethereum can handle much larger volume of transactions as compared to Bitcoin
- Hardforks –A significant change to the protocol software which may require upgrade.
- Financial infrastructure-Review whether key wallet providers and exchanges deal in the currency
- Regulatory Environment- For multinational operations, assessments need to be made around countries that allow transactions in Digital currency. For eg India has discouraged the use digital currency sighting AML contraventions
- Integration into Enterprise software: Considerations have to be made towards undertaking impact assessment for systems used by corporations across areas such as order to cash, procure to pay and record to report. As an example ERP packages such as SAP usually maintain currencies in two decimal numbers whereas Bitcoin is traded in upto 8 decimal numbers. Therefore configuration changes will be required to accommodate a digital currency
Another example would be Bank & Cash reconciliation functionalities which would need to be reviewed prior to trading in Digital currencies
- Program Rollout and Governance- Digital currency implementation covers mutlidisplicnary functions in an organization and therefore would ideally be spun as a separate program Whilst a number of companies have digital departments with Chirft Delivery Officers , assessment has to be made on the approach of the right structure of program governance and sponsorhip within the organization
Whlist critics may argue that the evolution of digital currency will take time however for enterprises to define a strategy and rollout would equally take time & effort .Therefore the need to recognize this new paradigm of digital disruption and draw competitive advantages will become important for companies worldwide