Cryptocurrency continues its march into the mainstream as 46.5 million Americans plan to purchase some form of it within the next year and 17 percent of U.S households already own it, according to recent industry surveys. Despite a $2 trillion decline in valuation since the all-time highs set in late 2021, demand for leading cryptocurrencies Bitcoin, Ethereum, Dogecoin and USD Coin remains strong; consumer intent to purchase crypto fell just three percentage points from January to June 2022.
While most digital currency moves through exchanges like Coinbase or Cash App, there may be a role for traditional financial services. While only about one in 10 plans to enter the market in 2022 due to risk concerns and a lack of clear regulation,
NYDIG Corporation reported that 81 percent of current Bitcoin holders surveyed would consider moving it to their financial institution, 83 percent would like to earn interest on Bitcoin deposited in their checking, savings, money market account
or CD, and 70 percent would switch to a financial institution that offers Bitcoin products and services.
Widespread acceptance of digital assets as legitimate currency that can be used for conventional purposes has some forward
momentum. President Biden’s March 2022 “Executive Order on Ensuring Responsible Development of Digital Assets” directs federal agencies to conduct numerous studies on digital assets like cryptocurrency, stablecoins and the viability of a U.S. Central Bank Digital Currency (CBDC). The whole- of-government approach to investigating
a possible regulatory framework could help ease concerns, set policy and expectations, and inform consumers, businesses and organizations about access to cryptocurrency markets.
While the order doesn’t point to a specific direction the government should take or establish any new regulations, it could. For instance, regulations require enhancements to AML processes and the U.S. CBDC could significantly impact wire transfer and other electronic funds transfer services. On the other hand, the order legitimizes exploration by forward-thinking organizations into their potential place in the future of the digital asset industry and investment in associated technologies that could improve their overall business performance and efficiency throughout global financiasystems.
This may be a trending topic at your organization. Gaining a better understanding of the risks and rewards is critical. Some questions you as a board member should ask are:
- What is the realistic demand for cryptocurrency from our customer base?
- Has management considered the technology and security concerns for cryptocurrencies and the framework for developing policies and procedures surrounding the currency?
- What are the current legal and regulatory guidelines and how will the organization monitor emerging regulatory considerations?
- What is the response plan for unforeseen exposure to cryptocurrencies, including extreme changes in valuations or volumes that may impact the strategy?