George Dessing, Executive Vice President, Treasury & Risk at Wolters Kluwer, discusses his organisation’s entry into the Metaverse, and the role treasury is playing in supporting cryptocurrency and blockchain initiatives to drive innovation.
Could you give me an overview of how Wolters Kluwer is harnessing crypto/blockchain?
At Wolters Kluwer, many of our solutions incorporate advanced technologies such as AI and robotic process automation (RPA). For example, our recently launched bank confirmation solution – CCH Axcess Validate – utilises blockchain technology. In addition, we have purchased virtual plots in the Metaverse to create new and more engaging ways for our global teams to collaborate with each other and with customers.
I’m not a gaming guy. But I know from my children – who are far more advanced than me in these things – that people are walking around the Metaverse with their avatars. And that’s the whole philosophy. You can envision a future where our customers can meet and talk with others and get advice, in addition to other ways to engage with our customers. You could also do that internally, with groups of co-workers getting together to explore the development of products and services.
What role is the treasury team playing in supporting these initiatives?
Like most treasury departments in global companies, we don’t see cryptocurrency as an asset class to create investment returns. But to pay the transaction fees – ‘gas fees’ – for our blockchain-based applications, you need cryptocurrency. Since treasury is a business partner to the other units of the company, we act as a provider or currency trader of the crypto funds, for example by purchasing Ether.
A lot of financial institutions are eager to talk to us about the latest developments in the treasury space. But if you ask a bank about opening a cryptocurrency wallet, they can’t help you. So we decided to do it for ourselves. Trying to open a cryptocurrency wallet as a corporate, rather than an individual, was a lengthy process that took 12-18 months to complete.
Acting as a provider of cryptocurrency funds means entering into unknown territory. You need to put internal controls in place and have policies and procedures relating to blockchain transactions, such as in what circumstances are transactions allowed and who can request them, as well as defining the responsibilities of treasury. You also need to speak to your accountants. Accounting requirements for how cryptocurrencies are handled are still not clear, and regulations are going to evolve. But you need to know how to classify crypto/digital assets on the balance sheet, and at what value.
What challenges has the team needed to address?
Since cryptocurrency platforms are not evaluated by the rating agencies, selecting them can be a challenge. And since opening a cryptocurrency wallet is different from opening a bank account, the associated KYC is also different. Risk management is key, but not straightforward. At the same time, and as I mentioned earlier, accounting requirements for how cryptocurrencies are handled are still not clear, and regulations are going to have to evolve.
Some cryptocurrency coins have gone from high value to worthless in a short space of time as the markets have fluctuated dramatically. But although there is a lot of volatility when it comes to cryptocurrency, we don’t keep it on a large scale.
For us in treasury, it’s important that we are supporting the business as a whole. The need to purchase cryptocurrency didn’t come from treasury, it came from the business. So we have to facilitate that in a proper controlled way. As a technology company, we strive to lead the way in cutting-edge advancements, including blockchain technology.
Moving forward, how do you see crypto affecting the evolution of the treasurer’s role?
I think cryptocurrencies and blockchain technology have the potential to streamline financial operations for treasurers. The use of blockchain enables us to make transactions faster and more securely. It also reduces the need for intermediaries, and the costs associated with that.
The regulatory environment around cryptocurrencies is still evolving, which is why a lot of banks have not stepped into wallets. There’s no doubt there should be regulation – in fact, for us as an organisation, regulation is our daily bread and butter. So, treasurers will certainly need to stay updated on the changing regulations and compliance requirements. They will also need to focus on cybersecurity and protect their crypto assets from cyber threats.
On another note, ESG is close to our hearts. Cryptocurrency is associated with high energy consumption – the network depends on the computational power of thousands of machines to maintain the security of cryptocurrency blockchains. However, there are all kinds of developments that reduce the energy consumption of crypto, such as Ethereum 2.0.
Finally, it’s very important to retain talent, and to make treasury attractive to younger talent. As a new field, this area is pretty interesting – it involves discussions with technology people, and our project is driven by innovation and investments in new technology. It’s exciting for the department to be stepping into this area.
