Digital Currency Pros And Cons
New bitcoin providers are emerging at a rapid rate, but
because of previous scandals and security risks surrounding cryptocurrencies,
businesses are still wary of using them.
In a recent case study for Treasury Management
International, Principal Peter Frank, Director Bruno Lopes and Manager Adam
Taplinger of PwC’s advisory practice explore the pros and cons of digital
currencies and explain that despite “the significant unknowns surrounding
digital currencies, some large corporate are beginning to open the doors for
acceptance.”
The three members of the PwC advisory also discuss how the
popularity of cryptocurrencies could grow or deplete and explain that it all
depends “on the outcome of these early steps, digital currencies may
emerge as a legitimate part of the mainstream payments landscape or recede into
the background as novelty.”
Pros
In the case study, Frank, Lopes and Taplinger say that the
introduction of this form of currency could be seen as an opportunity for
companies to implement new technologies and therefore, succeed as a business.
The benefits of digital currencies include lower transaction costs and the
ability to make payments at any time. Alongside this, digital currencies may
help companies to reduce and eliminate risks by using them as a transport
currency and as a way of settling inter-company transactions without paying extortionate
fees.
The PwC members also say that cash management will also
become simpler with the increased use of currencies like Bitcoin or LEOCoin
because they bypass banks and clearing houses as the payments are made directly
between the payer and payee. This could also eliminate extra process steps and
infrastructure costs, again making it easier for businesses to make payments.
Cons
According to Frank, Lopes and Taplinger, some risks that
have raised concerns about digital currencies in the marketplace among
consumers and businesses are security, payment beneficiary identification and
currency volatility.
Corporates should understand that there is a limited user
base for this type of currency and “the regulatory framework and tax treatments
of digital currencies are still being determined, “says PwC. As well as this,
infrastructure is still being developed as digital currencies are not accepted
by banks and companies cannot earn interest off their balances.
Furthermore, when corporates conduct businesses in foreign
countries, transactions occasionally come under threat of economic and
financial statement risk and it is important for businesses to understand that
they should manage action steps and exposure to risk accordingly.
Impact On Traditional Financial Services
The ever-growing popularity of digital currencies could
encourage banks to improve their digital facilities. For many years, corporates
have struggled with communicating effectively with banks and digital currencies
would increase pressure on banks and regulators to streamline connectivity.
Banks may respond to the emerging threat of cryptocurrencies by accelerating
growth in existing payment systems such as eBAM.
The PwC advisory practice states that although digital
currencies may be a new but popular concept in recent years, corporate
treasurers should continue to develop their current systems to better their
company as a whole. “Corporate treasurers should continue to monitor the
evolution process and consider both the opportunities and the risks that
digital currencies may present for their company’s payment landscape. While
significant changes to existing processes and infrastructure may be required in
the short-term, if implemented properly, digital currencies may represent the
potential for significant gains in the long term,” PwC says.
Frank, Lopes and Taplinger finalize the paper by saying that
an increase in the number of service providers and products that cater to
digital currencies is expected in the future and corporates should carefully consider
the potential of cryptocurrencies. They should also continue to monitor the
evolution process of these currencies as they could lead to business success.
Let’s Be The Part Of Largest CryptoCurrency
