Treasurer view: How digital currencies could transform treasury management systems

Muammer Cakir, an Independent Senior Treasurer, explores some of the challenges faced by digital currencies and the role they might play for treasury departments in the future.

Fund Operator POSTED ON 2/1/2022 9:31:16 PM

Fund Operator: Looking ahead five years from now, do you see independent digital currencies playing a significant part of treasurer’s capital holdings? Or do you feel that we are watching a potential tulip moment happening and one that will in time be seen as such in history?

Muammer Cakir: The underlying technology, the blockchain technology, will stay with us forever and this will have a significant impact across the financial system.

If we take an example of a land registry, if you own a house, who knows that you own that house, it is done through the land registry.

What happens here is that when you make a transaction, your records in the land registry are updated.

With blockchain, everyone in the system will be updated with this transaction so everyone knows that you bought or sold that house.

Therefore, you would not need a land registry anymore because it is updated everywhere, and everyone knows that you own that house.

“Blockchain technology will stay with us forever and this will have a significant impact across the financial system”

If you apply this logic to anything, then payments will be almost instantaneous in real time and internationally, which means that the banking system will be entirely different, maybe redundant for payments.

When it comes to crypto currencies, stability is the key for the payment side of it as a new asset class.

Obviously, these digital assets are a new asset class that everyone will have a portion of just as every portfolio has some sort of gold asset that they keep.

If you are holding gold in your portfolio, then most probably you will be holding digital assets in your portfolio in five years’ time as well. It also has far better properties than gold in most respects and is a kind of digital gold.

For treasurers, if you are not in the investment management field, then you are basically interested in the payment element. On that side, I don’t feel that adoption of digital currencies will be that fast.

“The treasury management systems will also need to adopt this schedule and trade by minutes or hours not by days.”

If the regulators come in and can bring some stability to digital currencies, either through regulations or with their own issuances, then this gives them the ability to become a mainstream payment medium for all treasurers globally.

In five- or ten-years’ time, everything will be in real time. Treasuries will be running on a 24/7 basis as crypto currencies are traded this way now and over the weekends.

At any time of day, whether it is the weekend or weekday, all over the world, there will be the possibility for a transaction and treasurers will not be confined by time.

The treasury management systems will also need to adopt this schedule and trade by minutes or hours not by days.

Fund Operator: ESG has been plagued by the lack of consistent standardisation across countries, which has been a wide topic of debate, do you think digital currencies could fall in these footsteps?

Muammer: In terms of the ESG standardisation across different countries, I do not feel that digital currencies standardisation will follow the same path.

Obviously, everyone wants to be a front runner in this area, but the motivation between ESG and the crypto currencies regulations are fundamentally different.

In the crypto currency world, the market forces are the essential player. The market wants to adopt a faster and cheaper solution for their payments.

Whereas for ESG, there is a different motivation that sits behind it.

Regulators all over the world do have concerns about this issue and do have the inertia to protect the existing infrastructure.

However, they cannot ban this innovation because it would simply mean that another country would go ahead and adopt the eco system and will attract all the investment and innovation.

In the medium term we will most likely see a compromise between the market forces and the regulators.

The regulators want more transparency with issues like money laundering, for example, and the market forces want faster, cheaper and more innovative payment solutions.

At the end of the day, crypto currencies are not only a payment solution, but they are a new digital asset class for investment purposes and so will be around forever.

The regulators can’t avoid them and must regulate them as a new asset class.


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