The Web 3 and DeFi Pitch to Your CFO — Why should a company leverage DeFi for their own operations?
What is the job of a Chief Financial Officer (CFO)?
Generally speaking, the CFO is the person for the numbers in an organization. With the mandate to look at bookkeeping, accounting, treasury. As well as responsible for tracking cash flow and financial planning and analyzing the company’s financial strengths and weaknesses, and proposing strategic directions.
But the role changed dramatically over the course of the year, with intelligent tools and more accurate forecasting, CFOs are becoming more and more strategic thinkers on how to deploy company assets in the best possible manner. So…
Why should a CFO look into DeFi and Web 3 use cases?
DeFi and Web 3 give new financial options available for investing, lending, asset management, insurance. Traditional finance is run by people who manage those products. DeFi runs on code instead and is much more efficient.
DeFi is a pure automation paradise if puzzled together for CFOs. The traditional human and error-prone tasks get like bookkeeping and auditing get totally automized.
What are some use cases in DeFi and Web 3 that might be interesting for the CFO?
- High-Inflation countries: Stablecoins compared to other cryptocurrencies like Bitcoin are stable and don’t underly the dramatic volatility. This makes those perfect for Save-Haven-Assets or to use them in high-inflation countries to safeguard the buying power.
- Intercompany transfers and remittance: Sending money around either intercompany or across borders comes with a heavy price tag. Blockchain solutions are a settling layer that operates much more cost-effectively and safes companies and people from those high fees.
- Spread and arbitrage: Bitcoin is deflationary money. Fiat is inflationary money. Holding your assets in Bitcoin gives you an arbitrage power over fiat money.
- Improve value: Aquire deflationary money e.g. Bitcoin through only accepting it from customers and sell inflationary Euro, Dollar through paying your suppliers with fiat currency. Over time you will hold more assets that increase in value due to deflation.
- Hold a reserve currency: There are tokens e.g. OHM that has the mission to be a reserve currency for crypto. Those currencies are not pegged to any fiat currency but have value due to their treasury. Those currencies can help to improve not only cash balances in corporations but to have a reserve currency in case of any crisis.
- Automated accounting: Maybe the greatest improvement is that with smart contracts and different types of currencies it is possible to completely automate your accounting as each transaction gets written on an immutable ledger anyhow. Let’s take DAO for example. You can check every day and every second how their treasury is evolving.
- Brand protection with NFTs. In case the CFO is thinking part of a big brand. With NFTs it’s possible to protect your brand and usage of e.g. logo, color much better.
What are the remaining risks to betting on DeFi and Web 3?
- This is still a new technology and area. There will be failures and scams. So currently it’s not worthwhile to bet completely on DeFi, but tipping the toe into this area to learn.
- Regulation and tax laws are still trying to figure out how to treat digital assets in several countries. Any change could have a huge challenge for corporations in fixing books and making the auditing much more complex.
