February 17, 2021
Jerald David and Blair Bingham
Thought Leadership

The Modern Treasurer Part 2: Bitcoin is a Treasury Investment Solution, ArCoin is a Treasury Management Solution

Digital Gold

For those following finance, you are already acutely aware of the recent rise of interest in Bitcoin. Bitcoin, once shunned as an asset used by criminals, is now in many institutional investors’ portfolios as a diversified hedge against inflation. Additionally, the narrative of BTC as “digital gold” is on the rise. Led by the highly publicized investment in Bitcoin by MicroStrategy, Bitcoin's role in traditional treasury management has skyrocketed with no ceiling to adoption in sight.


The Arca Labs team is always thrilled to see the increased interest and expanded use cases of blockchain and its digital assets. Large scale adoption fuels education and investment, bettering 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, many digital assets currently available are unsuitable for corporate treasuries. Most digital assets are unregulated and therefore lack the protections to shield from loss, theft or improper management. This dearth of investment safeguards 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. It’s 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, Square and Tesla’s publicly stated Bitcoin acquisitions is just that, hype. Though BTC might yet fulfill the “digital gold” theory, it is just one blockchain based asset. People buy into the glow surrounding BTC’s current digital gold theory while missing the “why” behind this theory of digital gold. If BTC can fulfill these investment thesis then we will have seen large scale blockchain and digital asset adoption. Given the current BTC investment narrative plays out, now is the time to learn about digital asset investment.


The Realists: Mitigating Treasury Management Risk

In terms of digital asset investments, one does exist that passes the scrutiny of even the most conservative treasurer - ArCoin, which is the digital asset created upon subscribing to the Arca US Treasury Fund. ArCoin is regulated, operates under a smart contract mitigating loss and theft, and offers protections that are compliant with a ‘40 Act Fund. Using ArCoin as a treasury management tool offers a blockchain based, treasury backed and low volatility solution for managing one's treasury.



ArCoin is a digitally native asset which can complement BTC holdings in a treasury management strategy. ArCoin reinvents 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. Transfers Completed Within Minutes 
  3. Less Intermediaries: Process Initiated & Conducted Internally; Peer to Peer Transfers



The Key Takeaway: If you are considering Bitcoin in your treasury, then you must also consider the technology that powers Bitcoin and understand its potential to revolutionize every financial product and rail. Although many other assets do not pass the compliance thresholds in place for traditional securities, 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 which blockchain will bring to treasury management overall. The train will not stop at Bitcoin. Why? Because blockchain offers efficiencies that current market infrastructure does not hold a flame to and once the market’s stickiness to old products begins to fade, blockchain, we believe, will prevail as the 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. 


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