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What is Crypto Treasury Management: A Complete Guide

03 Oct 2022 By : Shreya Vyas
Southeast Asia’s Lar

Key Takeaways:

  • Crypto treasury management is one of the newest ways of managing crypto assets.

  • Many companies and individuals use crypto as a hedge to protect their other assets from both inflation and an unstable equities market. 

  • While there are some regulatory concerns, the strategy seems promising. 

As digital transformation continues and more businesses adopt digital services, new challenges arise for companies. They need to find ways to manage their assets more efficiently. Digital transformation also means digitizing financial processes and records, making it easier to implement new solutions. 

The demand for cost-effective and streamlined treasury management solutions is rising in the financial industry as companies seek to remain competitive while streamlining their operations. To meet these requirements and challenges, many businesses have started implementing crypto treasury management systems that reduce operational costs while streamlining processes.

What is Crypto Treasury Management?

Crypto treasury management implements a centralized and integrated solution for managing a company's crypto assets, such as cryptocurrencies and tokens. It is an efficient way to track and manage crypto assets and provide reporting and other analytics to help with strategic decision-making. 

An effective crypto treasury management system can handle all types of crypto assets while also providing the option of converting them into a different asset type. This means that companies don't need to keep track of their crypto assets while also being able to use them when required. An optimal crypto treasury management system should include functionality for receiving, settling, and clearing crypto assets.

How Does Crypto Treasury Management Work?

For the treasury management of crypto assets, the first step is the collection of the assets. The business accepts its customers' investments in exchange for goods and services. The collected assets are put in a centralized wallet, and the controlled assets are then dealt with in batches to make settlements. The company exchanges its assets for financial instruments, such as fiat currencies. Dealing with assets is often referred to as "redemption." 

The next step of the crypto treasury management process is the collateralization of digital assets. The company uses its crypto assets as collateral for taking other financial instruments. An example is when a company issues a loan using its crypto assets as collateral.

Key benefits of crypto treasury management

Fiat currencies 

It is important to note that fiat currencies are central banks' standard currencies. These are government-backed currencies, while crypto-currencies are decentralized forms of digital money. 

Reduced operational costs 

One of the main benefits of a crypto treasury management solution is that it reduces operating costs. This is because a centralized system is easier to manage than a distributed system. 

Simplified accounting process 

Another benefit of a crypto treasury management solution is that it simplifies the accounting process. This is thanks to the centralized system that helps control data. 

Centralized accountability 

A crypto treasury management solution helps with centralized accountability. This means that it is easier to trace the transaction through the system.

Some of the concerns relating to crypto treasury management

Legal uncertainty 

There is a lot of concern regarding the legal status of crypto assets. This is because they exist in a legal grey area and are not recognized as official currencies. 

Lack of regulation 

The lack of regulation is another concern regarding crypto treasury management. This is because many countries have not yet implemented regulations for the crypto industry. 

Inconsistent performance 

A third concern is that the performance of crypto assets is unpredictable, which means that the assets' value can vary significantly with no predictable pattern.

The way forward - What to expect in the future

As time passes, more businesses are expected to implement crypto treasury management systems to take advantage of their benefits. A Crypto treasury management system help simplifies and automates financial processes, and this helps with increased speed and accuracy when it comes to processing transactions. 

An optimal crypto treasury management system is expected to provide a centralized system that helps automate cash and cash flow management functions. This enables companies to track their cash flow and manage their liquidity better. 

The future is also expected to bring more regulatory changes to the crypto industry. This will likely result in more countries recognizing cryptocurrencies as currencies. This is likely to help with the legal status of cryptocurrencies and ensure that they are regulated. Moreover, the performance of crypto assets is also expected to improve in the future, which is likely to attract more businesses to implement crypto treasury management systems. This is because the investments are expected to decrease in volatility.

Bottom line

Crypto treasury management is a centralized solution for managing a company's crypto assets. It is an efficient way of tracking and managing crypto assets and providing reporting and other analytics to help with strategic decision-making. 

An optimal crypto treasury management system should include functionality for receiving, settling, and clearing crypto assets. It should also help with the simplification of accounting processes, centralized accountability, and the automation of financial operations.