There aren’t many fans of Bitcoin among corporate treasurers. As one financial technology executive told us in April, “I don’t have a positive view of an unregulated currency being used by corporate treasury departments. … Although there was a small argument made for the [foreign exchange] efficiency of Bitcoin, it pales in comparison to the negatives: namely, finding and dealing with parties that will accept Bitcoin and not having any regulatory dispute resolution under the [Uniform Commercial Code] or similar.”
But with Apple’s move to consider accepting apps that transmit virtual currency, including Bitcoin, the cryptocurrency may gain some traction. More CFOs and treasurers, therefore, may find themselves having to figure out how to accept Bitcoin as payment. Accepting Bitcoin as currency presents a host of headaches for finance departments, so financial technology firm Trintech recently sent CFO a list of the concrete issues finance will face when trying to onboard Bitcoin. Here are Trintech’s tips:
Focus on the paper trail: The first step to integrate Bitcoin into a company’s financial processes is to determine how it will come in and where it will go. What statement will a company receive? Who within the finance and accounting teams will oversee the transactions?
Consult your auditors: While Bitcoins are novel, other companies are grappling with the same questions. Talk with your auditor about what it is hearing from other customers and if the firm itself recommends a specific approach. Consider starting a working group with the audit firm’s other customers that use Bitcoin, with the intent to share questions and solutions as they arise.
Assess value: A company will need to establish a process for assessing market value. That means evaluating public exchanges and selecting a process for determining the value of the company’s Bitcoins at month-, quarter- and year-end.
Minimize risk: Given Bitcoin’s price volatility, a company will need to think about what percentage of its Bitcoin assets should be reserved before it is converted into a traditional currency.
Establish control: For audit purposes, a company will need internal controls to test the new processes related to Bitcoin.
Close the loop: A company will need to integrate Bitcoin into its quarterly and annual closing process. If the company is public, it will need to disclose the new asset and liquidity risks that Bitcoin presents.
If all that sounds like a lot of work, it’s probably only the tip of the iceberg. CFOs can take heart, though, in one fact about Bitcoin: network effects favor the status quo, said William J. Luther and Josiah Olson of Kenyon College in a June 2013 paper, Bitcoin Is Memory. “Few retailers accept Bitcoin as a form of payment due to the small user base; and many consumers will not consider using Bitcoin until a significant number of retailers accept Bitcoin payments. … Bitcoin may fail to gain widespread acceptance even if it were superior to existing monies.”