Five Necessary Next Steps for Managing Your Company’s Crypto
Early in the cryptocurrency movement, there was persistent speculation about the efficacy of digital currencies. People worried that they wouldn’t stand up as a viable currency, that they wouldn’t be usable for actual transactions, and, most of all, that they were a divergent financial asset not aligned with the […]
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Early in the cryptocurrency movement, there was persistent speculation about the efficacy of digital currencies. People worried that they wouldn’t stand up as a viable currency, that they wouldn’t be usable for actual transactions, and, most of all, that they were a divergent financial asset not aligned with the traditional financial sector.
None of these things have proven to be true. Instead, digital assets have blossomed into a full-fledged financial asset that is both widely distributed and incredibly expansive.
Of course, for companies that deal in digital currency, this creates a host of other problems, primarily that cryptocurrencies can be challenging to manage. Fortunately, there are some best practices that, when followed, can make the process a lot easier.
Here are five things to remember when managing your company’s crypto assets.
#1 Make a Strategic Investment Plan
When it comes to managing crypto assets, the old cliché “failing to plan is planning to fail” is especially apt. Crypto markets are famously volatile, frequently enduring dramatic peak to trough investment cycles that can be upsetting even to the most experienced investors.
Therefore, crypto asset managers should operate on a strategic plan that’s responsive to market movements, but that isn’t dictated by short-term irregularities.
To put it simply, operate on principles as well as intuition.
#2 Diversify Investments
To best navigate the crypto space, asset managers should look to diversify their investments to ensure that they are less impacted by market movements. At this point, there is no shortage of opportunity for diversification. In addition to Bitcoin, there are hundreds of altcoins for investors to pursue.
At the same time, a deluge of crypto-related products including futures contracts, ETFs, and derivatives are coming to market. Exploring these investments can help protect companies from keeping all of their proverbial eggs in a single basket.
#3 Consolidate Resources
Unfortunately, the cryptocurrency ecosystem isn’t very cooperative. There are dozens of exchanges and wallet services that support various digital currencies, and they rarely work together, making crypto asset management frustratingly difficult.
Simplify investing by consolidating resources into a single location. Using a third-party service like Blox, a platform that brings together various crypto services into a single location, crypto asset managers can best account for and take action on their resources.
While many services support this, look for one that syncs all accounts into one screen, allows users to take action on their investments from that platform, and communicates with accountants and external auditors.
#4 Hire an Accountant
Countries around the world are beginning to enact laws and regulations that crypto asset managers need to comply with. Hire an expert who is familiar with crypto assets to ensure that surprise tax bills or other financial obligations don’t go overlooked.
With hundreds of ICOs, crypto hedge funds, and other institutions operating on cryptocurrencies, failure to appropriately address financial responsibilities places their company at incredible risk. Since many prominent accounting firms are racing to fill this void, there are many options available for companies seeking counsel.
Don’t leave it up to chance. Hire an expert accountant to sort out and document taxes and liabilities.
#5 Focus on Compliance
In the same way that taxes and other financial liabilities should be handled by a professional, crypto asset manager need to be aware of other compliance measures for their respective locations.
Indeed, the cryptocurrency movement is a global affair, but it is handled differently by various countries. As a result, developing and maintaining proper documentation is critical, if not incredibly exciting, component of crypto asset management. As TechCrunch reports, this is a trend that is a responsibility that is likely to increase, not abate, any time soon.
For companies tasked with managing crypto assets, the responsibilities of navigating a new asset class are immense, but they are not impossible. By adopting best practices and pursuing the right priorities, companies can successfully navigate this ecosystem as they leverage it to develop one of the future expressions of money and finance.