For those following finance, you are already acutely aware of the recent rise of interest in Bitcoin (“BTC”). Bitcoin, once shunned as an asset used by criminals, is now in many institutional investors’ portfolios as a diversified hedge against inflation. Led by the highly publicized investment in Bitcoin by MicroStrategy, Bitcoin's role in traditional treasury management has skyrocketed, with no apparent ceiling to adoption in sight.
The Arca Labs team is thrilled to see the increased interest and expanded use cases of blockchain and its digital assets. Large-scale adoption fuels education and investment, which serve to better the entire digital asset ecosystem. While the narrative of BTC as a treasury management tool is on the rise, it is important to contextualize how these developments and the digital asset ecosystem collide.
Why are other assets not being considered?
Simply put, we believe many digital assets currently available are unsuitable for corporate treasuries. Many digital assets are unregulated and therefore lack the governance designed to keep investors from loss, theft or improper management. This dearth of investment governance is why treasurers have overlooked digital assets in the past as treasury management solutions.
Bitcoin, as a CFTC-regulated derivative, is seen as a regulated asset but is still prone to loss or theft. Its uniqueness in this sense makes it stand apart from the above-defined crypto assets.
But believing Bitcoin to be the only investable digital asset for treasury management is a common misconception. The hype surrounding Microstrategy’s, Square’s and Tesla’s public announcements of Bitcoin acquisitions is just that, hype. Though BTC might yet fulfill some investment theses, it is just one blockchain-based asset. Given how the current BTC investment narrative is playing, we believe now is the time to learn about digital asset investment.
The Realists: Mitigating Treasury Management Risk
We believe that ArCoin, which is the digital asset created upon subscribing to the Arca US Treasury Fund, can meet the investment requirements of corporate treasurers. ArCoin operates under a KYC/AML enforcing smart contract. Using ArCoin as a treasury management tool offers a blockchain-based, treasury-backed solution for managing one's treasury.
ArCoin is a digitally native asset that can complement BTC holdings in a treasury management strategy. ArCoin seeks to help reinvent treasury management by offering the following:
Today, in Traditional Treasury Management
1. Costs are high
2. Timelines are protracted
3. There are needless intermediaries tied to legacy systems
Using ArCoin
1. Lower relative transaction costs*
2. Peer-to-Peer Transfers completed within minutes
3. Less Intermediaries: Process Initiated & Conducted Internally; Peer to Peer Transfers
* “Gas” is an additive fee that Arcoin shareholders will incur when they transfer their shares in a peer-to-peer transaction. Readers should keep this in mind when considering the “lower costs” of transacting on the blockchain.
The Key Takeaway
If you are considering Bitcoin in your treasury, we believe that you should also consider the technology that powers Bitcoin and understand its potential to revolutionize a multitude of financial products and rails. We believe focusing solely on BTC for treasury management is limiting. There is so much more to the digital asset ecosystem than a single asset acting as a hedge for equities or an alternative to gold. Treasurers should focus on the impact that blockchain can bring to treasury management as a whole. The train does not stop at Bitcoin. Why? Because we believe that blockchain offers efficiencies that the current market infrastructure does not, and once the market’s stickiness to old products begins to fade, blockchain, we believe, could prevail as a faster, cheaper, and more secure solution to treasury management.
So if you are a treasurer who is seriously looking to modernize your treasury, it is time to orient yourself to blockchain-enabled solutions like ArCoin.
This is the second post in a series, The Modern Treasurer. To read more on blockchain’s potential impact on treasury management, check out Treasury Management’s Biggest Pain Points Meet Blockchain.
Also, keep an eye open for Arca Labs’ comprehensive Digital Security Guide which will be released shortly.
