23-02-2023 | Aastha Tomar | treasuryXL | LinkedIn | After two years of hiatus, here I am again to write for the team I love the most and the team whom I owe the most in Netherlands. treasuryXL has a special place in my heart, I got linked with them as soon as I shifted to Netherlands in 2019 and since then they have been a constant source of support for me.
22-02-2023 | treasuryXL | LinkedIn | On January 24th, 2023 we hosted a joint webinar with our partner Kantox about the Currency Management Priorities for 2023. In this 45 minute session we take you through the key trends and opportunities in currency management.
20-02-2023 | treasuryXL | GTreasury | LinkedIn |
When left unaddressed, foreign currency risk can wreak havoc on your bottom line. But it doesn’t have to be this way. To keep foreign currency fluctuations under control and drive predictability in financial statements, many companies turn to FX hedge programs.
Source: GTreasury
Foreign currency gains and losses occur when a company transacts in a currency other than their home currency.
A foreign currency transaction results in either a payment or receipt of that currency and the amount of U.S. dollars it will take to pay the payment or collect from the receipt changes with exchange rates.
When companies have hundreds or thousands of these types of transactions, the gains and losses due to the exchange rates can add up quickly.
Even though a large gain on your bottom line seems appealing – especially compared to a large loss – it also indicates instability in your financial statements month-over-month and year-over-year. Not to mention, the nature of fluctuating exchange rates means times of gains are temporary and large losses are inevitable.
More often than not, companies value predictability and stability in operations. And that’s what an FX hedge program provides.
An FX hedge program protects the amount of home currency needed to make a foreign payment or receive from a foreign currency collection. In doing so, it eliminates a majority of the foreign currency gain and loss noise in financial statements you may have been experiencing. Large swings in either direction will no longer happen, which means you’re able to explain your true business results more effectively to your Board.
A hedge program doesn’t mean zero FX, but it does reduce a majority of the fluctuations. What’s left over can be explained by a handful of “buckets” – such as un-hedged currency impacts or under-hedging a currency amount.
Yes! Starting a hedge program can be done quickly. Many times, a foreign currency risk problem can be fixed in just a few weeks or months – especially when you work with a partner that puts programs together every day. Supported by automation, your FX hedge program can get up and running fast – and continue to run seamlessly from there.
Companies operating internationally are exposed to currency risk – a risk to earnings driven by changes in currency exchange rates. The ones that hedge their currency risk have certain advantages over non-hedgers. For example, instead of just experiencing the changing exchange rate impacts, these companies are afforded predictable results and time to react to changes.
If you’re curious about implementing a hedge program or just got tasked by your Board to fix a problem Hedge Trackers can help – and fast.
17-02-2023 | treasuryXL | Kantox | LinkedIn |
Get ready for 2023 with our deep dive into the treasury fundamentals that will take over the currency management scene. All you need to know, from trends to technology, in one article.
Disclaimer: This information is being shared for informational purposes only and was originally published by Kantox (Source)
CFOs and treasurers are getting ready to face the many challenges of 2023. Finding the right approach to currency management will help them protect their company’s margins and adapt to the new reality.
In this episode of CurrencyCast, we sat down with our special guest, François Masquelier, for a complete session on the treasury fundamentals for 2023.
In this article, we will take you through:
Let’s analyse what upcoming currency management trends are going to be the main focus for treasurers this year.
When we take a look at recent European Treasury surveys, the PwC global annual survey and the last OECD survey or surveys, there is a common theme regarding the main focus for treasurers this year.
FX risk management is a top priority for corporate treasurers from 2023 onwards, right behind cash flow forecasting and digital transformation. This means that FX risk remains highly ranked by treasurers, and there are several reasons for this.
Sometimes CFOs do not always understand all the possibilities in terms of what we call optimizing forward points, that is to say, interest rate differentials.
The forward points may be a concern when there is a significant differential of interest, especially with exotic currencies. So it could be expensive to hedge certain currency pairs, depending on which side you are in. Sometimes those forward points could be in your favour, and sometimes could not be in your favour.
Treasurers with a favourable interest rate differential can decide not to hedge at all and just monitor the exposure. This is feasible, but as it is a highly manual task, the monitoring process of the open exposure can become quite tedious and inefficient.
However, the good news is that there exist certain solutions that allow them to dynamically manage your FX exposure. This way, finance professionals can reduce or mitigate the impact of the swap points and, ultimately, reduce the impact on costs.
The dollar and the euro remain important currencies, but there is a number of currencies from smaller but well-managed economies gaining ground.
As corporate treasurers are taking advantage of the benefits of buying and selling in more currencies, there is a microeconomic and bottom-up phenomenon leading to that multi-currency world.
Using the more exotic or smaller currencies, if managed properly, can protect your company against risks. The best approach to currency management this year is to use the most profitable currencies all the time.
You can prepare for these trends if you have a strong currency management system that covers the entire FX workflow and allows you to have clear visibility over your exposure. Take a look at the two main areas that could be affecting your currency management strategy.
Sometimes the importance of having accurate cashflow forecasts is somewhat overstated when it comes to currency management.
Let’s take the example of a micro-hedging program for firm sales or purchase orders. The exposure to hedge is already a contractually binding item, not a forecast at all. So we don’t have really much of an issue.
On the other hand, if you take the case of a layering program or layered hedging program, the FX rate would be built in advance, so the forecasted exposure to hedges is also known well in advance.
And finally, thanks to conditional orders that protect a budget rate, the Treasury team can have time to update and finetune their cashflows.
At Kantox, we believe that currency management is more than just currency risk management, and that currency risk management, in turn, is more than just the instant execution of a hedge.
But that requires a holistic approach to currency management, to cover the entire FX workflow. This means doing away with a siloed approach that allows the company to grow beyond imagination.
In treasury and finance, there are many silos that impact the optimal management of the department. Having clear communication and flow of information with other departments is vital. It provides better visibility of the exposure and gives the CFOs the ability to react to the volatility in the market faster.
Something key in the challenging context we are facing that impacts the very thin operating margins, and a great way to generate added value to the treasury function.
One clear example of this is the companies with subsidiaries that operate in foreign currencies. By offering the subsidiaries to invoice or be invoiced in the local currencies, you are centralising the FX risk, generating value for them and improving risk management.
Another example of tearing down the silos in treasury management is the relationship between the commercial and finance teams. They don’t always see eye to eye, but providing commercial teams with the FX rate they need in real-time is a good way of eliminating that silo mentality.
As consultants from McKinsey said, the early adopters who drive cross-functional teamwork are going to reap the benefits and see a great increase in annual revenue growth.
Now that you know where to focus on improving your currency management, consider what tools could streamline this. But don’t forget to analyse if the current process is hurting you more before implementing new technology. Consider what areas of your FX workflow need revamping.
One of the main pain points for CFOs is not having access to real-time data and dashboards that reflect the current state of the company’s financials. This makes it more difficult for them to make the right decisions on time.
There are tools, like the TMS, that are used in the treasury function with the objective of getting summarized information and reports but they are not properly fit for decision making at the C-level.
They lack dashboards fed with real-time data that would make it easier or facilitate the communication between Treasury and the C-suite. TMS have a few other shortcomings when it comes to currency management.
“Often a CFO is a car driver who does not see his/her dashboard immediately but with delay” – François Masquelier
When pricing with an FX rate, using the forward rate instead of the spot rate can help companies in certain situations improve their competitive position without hurting their budgeted profit margins.
But most TMS lack a strong FX rate feeder, meaning the possibility of providing commercial teams with the appropriate rate -a spot, or the two-month or the six-month forward rate, the pricing markups for a client segment-
Another problem with TMS is that the functionalities in the report are standard and not really customer variables. They are more of like pret-a-porter solution.
When we talk about the reporting and development of specific functionality, treasurers must find a way to fulfil these gaps and find the missing pieces.
This means that in the pre-trade phase of the FX workflow, TMS is not covering the needs of treasurers and CFOs.
ChatGPT is all the rage right now, AI or artificial intelligence is making a comeback. But is it going to be the future in terms of treasury management and cashflow forecasting?
AI could play a role in the future of treasury management. However, we are still in the early days and there are many other ways CFOs and treasurers can start the digitization of the treasury function before resorting to AI.
There are some things that need to change in the way treasury is done and the approach of many finance professionals to the treasury tech stack. Those in charge of managing currencies need to be comfortable with their IT skills to make good use of new technology.
Another hurdle to the implementation of AI in treasury is the lack of access to comprehensive and immediate data. And finally, the inefficiency of highly manual processes when relying on spreadsheets for currency management. All of this takes away from producing accurate cashflow forecasts on foreign currencies.
As we have seen, there are many challenges to currency management that CFOs and treasurers will need to be well prepared for this year.
As interest rate differentials rise and the volatility in FX markets continues, there needs to be a good currency management system to handle the FX risk.
With the help of automation tools, finance professionals will be able to eliminate the silos that hinder the company’s growth and increase visibility over open exposure.
Download now our Currency Management Priorities for 2023 report to learn more about upcoming focus for treasurers and get your currency management strategy ready.
14-02-2023 treasuryXL | Treasurer Search | LinkedIn
Join us for a thought-provoking Live Session on Interim Treasury Management, where our experts will delve into the pros and cons of this exciting market.
Unlock the Benefits of Interim Treasury Management: Discover Why it’s a Must-Have for Your Business!
Our panel of seasoned interim treasurers, including Emiel van Maris, Francois De Witte, and treasury recruiter Pieter de Kiewit, will share their valuable insights and experiences.
This webinar is designed for aspiring interim managers, potential clients, and anyone interested in learning more about this market.
Don’t miss this opportunity to gain tips and tricks from the experts in the field and engage in an open discussion.
Register now to secure your spot!
Everyone is welcome to this webinar.
🌟Moderator: Pieter de Kiewit of Treasurer Search
🌟Duration: 45 minutes
𝘉𝘺 𝘳𝘦𝘨𝘪𝘴𝘵𝘦𝘳𝘪𝘯𝘨 𝘺𝘰𝘶 𝘤𝘰𝘯𝘴𝘦𝘯𝘵 𝘵𝘰 𝘳𝘦𝘤𝘦𝘪𝘷𝘪𝘯𝘨 𝘤𝘰𝘮𝘮𝘶𝘯𝘪𝘤𝘢𝘵𝘪𝘰𝘯𝘴 𝘧𝘳𝘰𝘮 𝘵𝘳𝘦𝘢𝘴𝘶𝘳𝘺𝘟𝘓 𝘳𝘦𝘨𝘢𝘳𝘥𝘪𝘯𝘨 𝘵𝘩𝘦 𝘭𝘢𝘵𝘦𝘴𝘵 𝘵𝘳𝘦𝘢𝘴𝘶𝘳𝘺 𝘪𝘯𝘴𝘪𝘨𝘩𝘵𝘴. 𝘠𝘰𝘶 𝘮𝘢𝘺 𝘸𝘪𝘵𝘩𝘥𝘳𝘢𝘸 𝘢𝘯𝘺𝘵𝘪𝘮𝘦. 𝘗𝘭𝘦𝘢𝘴𝘦 𝘳𝘦𝘧𝘦𝘳 𝘵𝘰 𝘰𝘶𝘳 𝘗𝘳𝘪𝘷𝘢𝘤𝘺 𝘗𝘰𝘭𝘪𝘤𝘺.
We can’t wait to welcome!
Best regards,
Kendra Keydeniers
Director, Community & Partners
13-02-2023 | Dinesh Kumar | treasuryXL | LinkedIn | Imagine a setting where your treasury management system (TMS) and enterprise resource planning (ERP) system work together seamlessly, like a well-oiled machine. In this case, your treasury team has real-time visibility into financial transactions and can make informed decisions quickly and efficiently. The process of connecting a TMS to an ERP system may seem daunting, but it’s a crucial step in achieving a more streamlined, efficient and accurate corporate treasury operation.
09-02-2023 | The year’s second edition features a discussion on the newest treasuryXL poll results, including a review of treasurer voting patterns and expert perspectives on effective currency management.
09-02-2023 | treasuryXL | Kantox | LinkedIn |
When managing foreign currencies there is an underlying FX risk that Treasurers may not see, the credit risk. In this week’s episode of CurrencyCast, Agustin Mackinlay explains how to mitigate this risk.
Disclaimer: This information is being shared for informational purposes only and was originally published by Kantox (Source)
Embrace currencies to protect your capital, maintain your cash flow, secure your earnings and access better financing! Let’s find out how to mitigate the consequences of the underlying FX risk, the credit risk.
When working with foreign currencies, CFOs and treasurers have the mission to try to reduce the FX risk as much as they can. But there is an underlying currency risk that they could be missing, credit risk.
In this week’s episode of CurrencyCast, we shared the secrets to mitigating credit risk by embracing currencies. Now, we will explain in detail what are the key actions that involve eliminating this risk.
There is an underlying currency risk that you are probably not seeing and could eliminate easily just by following a simple rule in your currency management strategy, embracing currencies.
This is the credit risk or, more precisely, the risk in account receivables when customers need to settle their bills in a different currency than their own.
What do we mean by embracing currencies? There are many benefits that treasurers and CFOs can gain from implementing a multi currency approach to their FX strategy.
Some of them include the ability to price more competitively or boost your company’s profit margins just by operating with multiple currencies. But there is one which is helping companies drastically reduce currency risk, by uncovering the underlying credit risk.
We’ll reveal the advantages of taking ownership of the underlying FX risk so that you can expand your business with full confidence.
If you are selling in Emerging Markets like Brazil or Turkey but using only one currency like EUR or USD, you might be tempted to think that you have solved the currency risk problem.
But that’s an illusion: the underlying currency risk is still very much there. By urging customers to use a currency that is foreign to them, you are in effect transferring that risk onto their shoulders.
In the event of a sharp devaluation of the local currency, they might feel inclined to wait for a better exchange before settling their bills. In other words, your customers would speculate in FX markets with your firm’s money.
We’ve seen that phenomenon at play after the pandemic, both in Latin America and Eastern Europe. As a treasurer or CFO, you don’t want to be in that position.
In order to avoid your client’s FX risk from turning into your own credit risk, the solution is to sell in the currency of your customers while taking care of the underlying FX risk. Needless to say, this presupposes a strong, automated currency cash flow hedging program.
Such programs include: hedging firm sales/purchase orders as they materialise, hedging forecasted exposures for one or more campaign/budget periods, or a combination of these, with tools that provide visibility over the exposure throughout.
Now you know the importance of seeing there is another added layer to your currency risk that you could be missing. It is time to consider the advantages that would flow from taking full ownership of the underlying currency risk:
After uncovering the underlying FX risk, you need a solution to mitigate the credit risk.
A currency management automation solution could be the answer for companies that want to embrace currencies. This type of tool can streamline your currency management strategy and automate your entire FX workflow to reduce FX risk, including the ‘hidden’ credit risk.
As we mentioned before in this episode of CurrencyCast, we live in a multi-currency world where businesses can take advantage of the profit margin-enhancing benefits of selling in many currencies, like monetising existing FX markups or driving high-margin sales to company websites.
Thanks to automation, these advantages far outweigh the perceived inconveniences and costs of managing the underlying FX risk. And, in the current scenario of uncertainty, you get an additional and very attractive bonus: less credit risk in your commercial operations. That’s quite a lot!
08-02-2023 | Carlo de Meijer | treasuryXL | LinkedIn |
The collapse of crypto exchange FTX early November 2022 plunged the crypto markets into a crisis. This event sparked a wave of crypto-bankruptcies, failed investments and rapid collapses.
By Carlo de Meijer
The current situation is a mixture of concern and uncertainty with the future of the crypto markets. This has triggered regulators worldwide to come with stricter regulations and oversight.
The main issues I want to talk about in this blog are: How did the crypto markets react up till now? What will 2023 bring for the crypto market? And what is needed to regain trust in the crypto markets?
FTX’s collapse and its bankruptcy triggered fears of contagion in the crypto market. This produced a wave of bankruptcies in the crypto industry, while other crypto companies had to reduce their workforce or were confronted with liquidity problems.
Here are just a handful of crypto firms affected by the crypto downturn to name a few include names like Genesis, Binance, BlockFi, Crypto.Com, Huobi, Coinbase, Bitvavo, Kraken, Swyftx, Blockchain.com, ConsenSys, Amber Group and Silvergate Capital. And there are many more.
Wave of bankruptcies
Main example is Genesis, the crypto lender and trade platform owned by Digital Currency Group (DCG). Genesis which served as one of the pillars of the crypto industry came into trouble when it had lent hundreds of millions to the sister company of FTX, Alameda Research.
Genesis has filed for Chapter 11 bankruptcy protection. Under this process, a struggling company is sheltered from creditors temporarily while it attempts to restructure its finances. Since then Genesis has frozen the outflow of client assets. Genesis owes creditors more than $3 billion. s a result more than 100 thousand of creditors of the US crypto company may lose at least a part of their claim/exposure..
Another example is crypto lender BlockFi, which earlier sought financial assistance from FTX. BlockFifiled for bankruptcy protection on Nov. 28, citing ‘significant exposure’ to FTX as the main reason for its collapse. That loan, for $275 million, is one of BlockFi’s outstanding debts that needs rationalizing under Chapter 11.
Cut down on workforce
Last year, many crypto giants were forced to cut down deeply on their workforce to cope with mounting losses. It comes as floods of investors have piled out of centralized exchanges after the collapse of FTX.
To name some examples. Crypto.com announced that it will be laying off 20% (490 employees) of its workforce, being unable to weather the collapse FTX without further cuts. Huobi, the crypto exchange plans to reduce its global headcount by about 20%, in the latest round of layoffs to hit the beleaguered cryptocurrency industry.
Coinbase, the largest crypto platform of the US has decided to cut about a fifth of its workforce (950 employees), as it looks to preserve cash during the crypto market downturn. Coinbase, had already slashed 18% of its workforce in June. Earlier December last year.
Genesis laid off about 30% of its workforce as it faced up to the FTX fallout, which had already forced to it to stop customer withdrawals. While the mother company DGC on its turn had to sack one-tenth of its staff.
Run out of liquidity
Triggered by the FTX collapse a growing number of crypto platforms are confronted with liquidity problems. The implosion of FTX exchange has created a liquidity crisis in the crypto market that may contribute to an extended crypto winter.
Binance, the world’s largest exchange, is facing questions about the reserves it holds to backstop customer funds. As much as $6 billion in digital tokens were pulled from the exchange between Dec. 12 and Dec. 14. Last month, Binance briefly paused withdrawals of the USDC stablecoin, prompting concerns over its own ability to cover client redemptions. It has since resumed USDC withdrawals.
Another crypto company in trouble is crypto trade platform Gemini. Gemini lent Genesis funds for its interest-bearing product, is no trying to recoup $900 million of customer money from the embattled firm.
The FXT collapse and the resulting meltdown of the cryptomarkets also has its impact on the Dutch crypto world. Bitvavo, the largest Dutch crypto trade platform (40% of the market) that manages 1,6 billion euro and has more than 1 million clients, is becoming victim. Bitvavo that has stalled 280 million dollar at Genesis and might not get back tens of millions of client assets.
More crypto companies feel the pain
The number of companies that are getting into trouble because of the FTX collapse is firmly increasing. Due to market conditions Coinbase has made the difficult decision to halt operations in Japan and to conduct a complete review of their business in the country. Blockchain-based payment platform e-Money that aims to bridge the legacy banking system through a single blockchain layer, has ceased its issuance of the EEUR stablecoin in the context of current market conditions.
The Metropolitan Bank Holding Corp, the holding company for Metropolitan Commercial Bank, has announced that it decided to completely shut down its crypto arm. Circle Internet Financial, which runs popular stablecoin USD Coin, is ending its bid to go public. And US-based Crypto payment firm Wyre is on the brink of liquidation looming shutdown and dissolution of operations of in January 2023.
Negative investor sentiment
The FTX collapse has affected investors across the globe and deterred investor confidence in crypto currencies. It firmly has reduced the trust of investors in the cryptomarkets questioning their credibility. As a result crypto exchanges saw disappear billion dollars from client accounts. While on the other many institutional investors in FTX had their investment stuck on the platform after it filed for bankruptcy on November 11. In the worst case this could cost investors, customers and lenders many billions of dollars.
The collapse caused many retail and institutional investors to rethink their future crypto investments as well as renew their focus on how sustainable crypto is for business. The FTX implosion has deterred investors and large buyers away from the crypto ecosystem. The FTX collapse has also “shaken potential investors,” making it more difficult for crypto start-ups to bring onboard the funding they need to scale.
As result of all these events many crypto currencies were in a downward gliding spiral triggered by the FTX collapse.
Major crypto currencies Bitcoin and Ether fell to a historical low
When FTX exchange announced bankruptcy, the Bitcoin price dropped from over $20,000 to under $16,000 in a matter of days, a fall of more than 75 percent from their highs of $69.044 on 11 November 2021. The second major crypto Ethereum also saw a similar decline, falling from above $1,600 to below $1,200 as the events unfolded (high 10 November 2021 $4444.53). Other tokens like Dogecoin, Avalanche, and Solana also plunged heavily. Striking is that the crypto currencies regained some strength during January. Bitcoin, the leading crypto currency, climbed to well above $21.000 level, a 26% gain up till now.
Total market cap lost more than $2 trillion
As a result this deep fall in crypto currencies value and due to defaults and bankruptcies the market cap for cryptocurrencies has fallen to $798 billion, or more than 75 % from a record peak of almost $3 trillion in November 2021. In all more than $2 trillion in speculative market value evaporated in 2022. In January 2023 the combined digital currency market cap surged back and is now pegged beyond $ 1 trillion.
What is the expectation for the cryptomarkets for 2023 and beyond? Remediation will take time, and very likely this could extend this crypto winter by many more months, perhaps through the end of 2023or even longer in my view. This might give the recent uptake in crypto currencies a short live.
Contagion takes a long time to fully play out. According to experts, the true contagion effects of the FTX fiasco will continue to unravel in the coming period. There is the thread that other domino stones will tumble in the overheated crypto market. FTX contagion could lead to more bankruptcies and lawsuits this year as well.
The crypto market might see “second-order effects” from counterparties that may have lent or interacted with either FTX or Alameda. That could create a liquidity crisis in the crypto market and cause major losses and liquidations throughout the crypto industry. This especially goes for the smaller crypto players.
This longer crypto winter could lead to more liquidity issues and bankruptcies, as well as further deterioration of investor confidence. The impact that this will have is that a lot of projects actually are not going to have the funds, and therefore the resources, for them to continue and develop.
The crash of the FTX crypto exchange highlights the shortcomings of this industry, lacking financial and structural transparency as well as financial protection of consumers.
The FTX downfall has triggered renewed calls for heightened regulation and more effective oversight of the largely unregulated crypto markets to protect investors and customers. Next to more stringent regulation and supervision, creating a more sound crypto market will also ask for a much more self-cleaning capacity of the industry industry while investors should be educated to understand the various risks of crypto.
Stringent regulation and more effective oversight
The FTX collapse will looks certain to stir regulators into action. The industry is steadily moving towards regulation globally to protect investors from market uncertainty obliterate security risks and prevent any impact on the monetary system.
Governments in the U.S, European Union and the U.K. are increasingly taking steps to clean up the market thereby preventing similar collapses. But while the US and UK are still in a very early stage the EU is well advanced and might become a blueprint for regulators around the world.
U’s Market in Crypto Assets Regulation
The EU’s Markets in Crypto-Assets Regulation (MICA) is the most comprehensive regulatory framework to date. The bill is wide-ranging, covering money laundering, the environment, corporate reporting and consumer protection.
It aims to reduce the risks for consumers by making crypto exchanges liable if they lose investors’ assets. It would require stablecoin issuers to hold enough reserves to prevent their collapse, and would require crypto miners to disclose their energy consumption. What’s more, any exchanges that operate in the region will have to be monitored by a financial regulator from an EU member state.
MiCA may serve as a blueprint for regulators around the world. The EU crypto regulation will likely have an impact that extends well beyond the EU’s borders due to its comprehensive nature and its detailed provisions around stablecoin issuance, market manipulation, custody, transaction reporting, and more.
If the European measures are successful, there’s a strong likelihood that other jurisdictions will adopt something similar – but on the one hand, that takes time to implement. It is important that regulators act quickly. But MICA is not due to start until.
Increased scrutiny and litigation by regulators
Regulators have long litigated the ‘bad apples’ in crypto. The U.S. government will continue its litigation in 2023, and we will see additional crypto-related sanctions guidance, enforcement actions and designations in the near term.
Another step to create a more healthier and credible crypto market is by increasing regulatory scrutiny. Cyber-enabled crime presents an increasing threat to international economic stability, as well as to honest individual investors in cryptocurrency.
In the mean-time supervisors worldwide have become more alert and intervene more often. Regulators in the US already started intensifying there scrutiny activities. The SEC recently advised public-reporting crypto companies to ensure they are adequately disclosing to investors any potential material adverse exposure they may have as a result of bankruptcy events and financial distress involving crypto intermediaries. The Federal Trade Commission is investigating multiple crypto companies over allegations of deceptive conduct. They are investigating several firms for possible misconduct concerning digital assets.
The Dutch central bank has fined the US trading platform Coinbase for cryptocurrencies Coinbase. Being active in the Netherlands without being registered, the platform should pay a fine of 3,3 million euros. Since 2020 crypto companies are obliged being registered at DNB. In this way the central bank aims to better keep an eye on if these platforms ate doing enough to prevent money laundering of financing of terrorism.
Self-cleaning ability in the crypto world
As long as there is no crypto regulation on a large scale there is immense pressure on the crypto world to bring their house on order to recover its credibility and reputation. There is growing awareness at crypto companies that only more transparency could trigger the crypto markets to grow again. We are already seeing a renewed commitment by crypto platforms to building better, more trustworthy solutions in the space and expect that trend to be a core theme of 2023. Other announced they will only partner with platforms that are over collateralized and assure the safety of their members’ assets.
Crypto exchanges also took some steps to protect their investors. A growing number of crypto companies have announced to publish an audit soon or are working on releasing Proof of Reserves to assure their users of their fund safety. But without proper regulation it will be a great challenge to draw up annual accounts control if the bookkeeping largely consists of crypto currencies.
Those steps are just the beginning, and companies and executives within the crypto sector would be wise to get their houses in order to avoid investigations or actions that can drain resources, harm reputations and destroy businesses.
Education for investors
Crypto companies are also starting to educate their users about different aspects of trading in this ecosystem. The crypto market is still relatively new and not yet fully understood, and market conditions can change rapidly. They are asking investors to keep in mind the potential risks and make well informed decisions before making any investments. For investors it is important to conduct thorough research and consult with professionals before making any investment decisions.
Narrower cooperation
In the wake of FTX’s collapse there is an opportunity for the crypto and broader financial industry and its governing bodies globally to come together and work towards standards of conduct, including reporting on reserves and other disclosures to ensure that the industry is doing its utmost to safeguard consumers thereby building trust in the crypto markets. .
Regulators have the challenge and sometimes competing goals of keeping consumers safe while supporting the future of innovation. Striking the appropriate balance between consumer protection and innovation will require close collaboration between the industry and policymakers across jurisdictions due to the borderless nature of crypto.
There are no crystal balls in crypto and predictions are not certain.
Though the outlook for crypto is bad at this time, the broader industry is not going away. We should look at it as a transition period.
The year 2022 should act as a wakeup call for both crypto companies and investors. Following the high volatility recorded in 2022, the crypto community understand that regulations will play a crucial role forward. The crypto sector must adapt if it wants to survive. Their survival will be determined by how seriously they take risk management, governance and regulation.
It’s clear the FTX drama could radically reshape crypto in the years to come. The cryptocurrency industry will never look the same again after all of this turmoil.
Economist and researcher
07-02-2023 | Eurofinance | treasuryXL | LinkedIn |
Join senior treasury peers on March 7th in London at EuroFinance’s 10th annual Effective Finance & Treasury in Africa. Understand changing developments and the unique opportunities and challenges of doing business in this dynamic region.
This year’s speaker line-up includes experienced treasurers – all active in African markets – including:
● Edward Collis, Treasurer, Save the Children
● Neiciriany Mata, Head of finance, Angola Cables
● Marta de Teresa, Group treasurer, Maxamcorp
● Chigbo Enenmo, Finance and treasury manager, Nigeria LNG
● Folake Fawibe, Integrated business service lead, Danone, Southern Africa
● Jan Beukes, Group treasurer, MultiChoice Group
They will discuss important topics including cash and FX, payments, liquidity and financing, digital transformation, share success stories and provide practical guidance on how to optimise your treasury operation for growth.
For the full agenda and to register, please visitt this link.
Quote discount code MKTG/TXL10 for an exclusive 10% discount for TreasuryXL readers.
If you have any questions, you can contact the EuroFinance team directly at [email protected].
Treasurers manage risk by keeping cash safe, ensuring access when needed, and seeking returns aligned with risk appetite.
But with rising inflation, geopolitical tensions, and market disruptions, uncertainty is growing – join our live session with TreasurySpring to explore how treasurers can navigate the storm.