Blockchain is entering its institutional era. And the enterprise treasury function is all eyes and ears to the innovation.
For example, news came this week that enterprise software maker MicroStrategy, whose business mission includes buying bitcoin, sold 13.6 million shares, tapping the public markets explicitly in order to fund further purchases of the nominal digital asset.
Per a U.S. Securities and Exchange Commission filing on Monday (Nov. 18), MicroStrategy acquired about 51,780 bitcoin at a cost of around $4.6 billion between Nov. 11 and Nov. 17.
MicroStrategy also announced on Monday that it will be offering another $1.75 billion of its 0% convertible senior notes due 2029 for sale in order to fund the purchase of more bitcoin.
The company currently holds around $30 billion in bitcoin on its balance sheet.
While November must have been an exciting time for MicroStrategy’s treasury team, and the headlines harken back to actions taken by firms like Tesla and Block with their own digital asset-heavy balance sheets, today’s treasurers and finance leaders are separately finding out for themselves that blockchain technology holds several key applications across corporate finance as a technology — and not just an asset class.
With real-time transparency, reduced costs and streamlined operations, blockchain is reshaping traditional treasury practices. For corporate treasurers navigating a global economy defined by uncertainty and complexity, blockchain technology offers a compelling promise: a transformation of the treasury function from a cost center to a strategic enabler.
Read more: Why Banks Might Want to Have a Blockchain Strategy
Blockchain’s Key Applications in Corporate Finance
Five of the most promising uses of blockchain within corporate finance include streamlining cross-border transactions, providing real-time liquidity and cash flow management, innovating trade finance and supply chain financing, as well as optimizing risk management, such as by way of tokenizing real-world assets.
The traditional system of cross-border payments — laden with inefficiencies, high fees, and multi-day delays — has long been a sore spot for corporate treasurers. Transactions often traverse a labyrinth of correspondent banks, each adding costs and time to the process. Blockchain technology disrupts this paradigm by enabling 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.
When it comes to cash flow, managing liquidity across a web of subsidiaries, bank accounts and currencies has traditionally required a blend of guesswork and delayed reporting from the finance function. Blockchain changes the game by providing treasurers with real-time visibility into cash positions across the organization and allowing them to make 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, told PYMNTS.
With instantaneous updates on balances and movements, treasurers can make more precise funding and investment decisions. Blockchain-based platforms also enable predictive analytics for liquidity needs, allowing firms to optimize working capital while minimizing idle cash.
Read more: Are Blockchain-Based Smart Contracts a Smart Option for Global Financing?
Looking Ahead to an On-Chain Financial Future
While blockchain is no silver bullet, its applications in treasury management offer a glimpse of a more efficient and transparent financial future.
Trade finance, a linchpin of global commerce, is notoriously complex. Issuing letters of credit, managing compliance, and resolving disputes often involve reams of paperwork and significant delays. Blockchain helps digitize and simplify these processes.
Within supply chain financing, which has traditionally favored large buyers with strong credit ratings, blockchain can address traditional imbalances through dynamic discounting and invoice factoring, powered by tokenized transactions.
And in an increasingly volatile global economy, risk management is a top priority for treasurers. Blockchain enhances hedging strategies by enabling the creation and tracking of tokenized assets — digital representations of commodities or currencies. For example, a token representing a barrel of oil or a foreign currency can be tracked and traded in real time, giving treasurers unprecedented control over their hedges.
“The largest financial institutions are eager to explore tokenized assets,” Nikola Plecas, head of commercialization at Visa Crypto, told PYMNTS, but noted that they require regulatory certainty to do so at scale.
After all, while blockchain’s potential is clear in a sandbox environment, several key hurdles to its widespread adoption must be addressed. While regulatory uncertainty is chief among them, interoperability and technical complexity are also important challenges to consider.
But the marketplace is marching onward. And forward-thinking treasury teams must keep up.
Last month, Visa debuted its Visa Tokenized Asset Platform (VTAP), which allows banking partners “to create and experiment with their own fiat-backed tokens in a VTAP sandbox.” In an initial use case, the platform enabled the issuance, transfer and redemption of a bank token on a blockchain, along with interactions of the token with smart contracts.
Last week, Tether launched its own RWA tokenization platform, dubbed Hadron, which lets users “tokenize anything, anywhere,” including everything from stocks to loyalty points.
In March, BlackRock unveiled its first tokenized fund issued on a public blockchain, the BlackRock USD Institutional Digital Liquidity Fund (BUIDL). The company said last week that it expanded the offering, “by enabling BUIDL to be used within leading blockchain-based financial products and infrastructure across ecosystems.”
