Blockchain’s Impact on Modern Treasury Functions
Blockchain technology is rapidly entering its institutional phase, and enterprise treasury functions are taking notice. For example, MicroStrategy, a company known for buying bitcoin, recently sold shares to purchase more of the cryptocurrency.
In a November filing, MicroStrategy acquired approximately 51,780 bitcoin for around $4.6 billion. The company also announced plans to sell more convertible senior notes to fund additional bitcoin purchases. MicroStrategy currently holds a substantial amount, roughly $30 billion, in bitcoin.
While this must have been an eventful time for MicroStrategy’s treasury team, and echoes similar moves by firms like Tesla and Block with their own digital asset-heavy balance sheets, treasurers and finance leaders are discovering that blockchain technology has key applications across corporate finance, not just as an asset class. With real-time transparency, reduced costs, blockchain technology is transforming traditional treasury practices.
For corporate treasurers navigating an uncertain and complex global economy, blockchain promises to transform the treasury function from a cost center to a strategic enabler.
Key Applications in Corporate Finance
Several promising applications of blockchain are emerging in corporate finance. These include streamlining cross-border transactions, offering real-time liquidity and cash flow management, improving trade finance and supply chain financing, and optimizing risk management – for example, through tokenizing real-world assets.
The traditional system of cross-border payments, burdened by inefficiencies, high fees, and delays, has caused problems for corporate treasurers. Transactions often go through numerous correspondent banks, adding expense and time to the process. Blockchain technology enables instantaneous settlements. “Blockchain technology, and public blockchains in particular, are opening up a number of new use cases, one of which is to transfer value … from one country to another,” Raj Dhamodharan, EVP blockchain and digital assets at Mastercard, told PYMNTS.
Regarding cash flow, the need to manage liquidity across multiple subsidiaries, bank accounts, and currencies has traditionally relied on guesswork and delayed reporting. Blockchain offers real-time visibility into cash positions, aiding more precise funding and investment decisions. “In five years, we might have a blockchain or state-machine capability where financial institutions involved in a transaction can look at that common state and use it as a source of truth to update their own balance sheets,” Tony McLaughlin, emerging payments at Citi Services, stated.
Blockchain platforms provide immediate updates on balances and movements, giving treasurers the ability to make accurate funding and investment decisions. They also enable predictive analytics for liquidity needs, allowing firms to optimize their working capital while keeping idle cash to a minimum.
The Future of On-Chain Finance
Blockchain is a promising, but not a magic solution. Its applications in treasury management show the potential for a more efficient and transparent financial future. Trade finance, a key element of global commerce, is often complex. Issuing letters of credit, managing compliance, and resolving disputes involve significant paperwork and possible delays. Blockchain helps with digitizing and simplifying these processes.
Within supply chain financing, which has traditionally favored large buyers, blockchain can address imbalances through dynamic discounting and invoice factoring, powered by tokenized transactions. In a volatile global economy risk management is a top priority. Blockchain improves hedging strategies by creating and tracking tokenized assets – digital representations of commodities or currencies. For example, a token representing oil or a foreign currency can be tracked and traded in real-time, giving treasurers additional control over their hedges.
“The largest financial institutions are eager to explore tokenized assets,” notes Nikola Plecas, with Visa Crypto, but recognizes the need for regulatory certainty for large-scale adoption. While blockchain’s potential is clear with appropriate testing, key hurdles remain before its widespread adoption. Regulatory uncertainty, interoperability, and technical complexity remain critical challenges. The financial marketplace is evolving, and treasury teams must stay informed.
Visa recently launched its Visa Tokenized Asset Platform (VTAP), enabling banking partners to create and experiment with their own fiat-backed tokens in a VTAP sandbox. Tether recently launched its own RWA tokenization platform, Hadron, allowing users to “tokenize anything, anywhere.” BlackRock released its first tokenized fund, the BlackRock USD Institutional Digital Liquidity Fund (BUIDL), on a public blockchain. The company later expanded its offerings by enabling BUIDL to be used in blockchain-based financial products.
