Tracking Business Bitcoin Adoption: Insights from River’s Sam Baker

Briefing Notes

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Summary

The September 20, 2024 podcast from The Last Trade features Sam Baker of River, who provides in-depth insights into the rising trend of business Bitcoin adoption. The discussion covers the growing interest among family-run and private businesses in integrating Bitcoin into their treasury strategies, driven by its potential as a long-term store of value. The conversation also addresses the challenges faced by public companies, including regulatory hurdles and the need for robust custody solutions. Baker emphasizes the importance of ongoing education, regulatory clarity, and user-friendly custody options in facilitating broader corporate adoption of Bitcoin.

Take-Home Messages

1. Custody is Fundamental: Businesses must prioritize evaluating secure and user-friendly custody solutions, as these are critical for wider Bitcoin adoption.
2. Regulatory Uncertainty Hinders Growth: The absence of clear regulatory guidelines is a significant barrier for public companies, highlighting the need for ongoing dialogue with regulators.
3. Family-run Businesses Lead Adoption: Smaller, family-run businesses are at the forefront of Bitcoin adoption, driven by their long-term focus and agile decision-making processes.
4. Cross-Border Payments Potential: Bitcoin’s use in cross-border payments, particularly in regions with unstable currencies, is emerging as a significant opportunity for business adoption.
5. Education is Crucial: Addressing misconceptions through education is essential for businesses to understand Bitcoin's potential as a strategic asset and integrate it effectively.

Overview

In this episode of The Last Trade, Sam Baker from River discusses his recent report on business Bitcoin adoption with hosts Jackson Mikalic, Jesse Myers, and Michael Tanguma. The conversation highlights the growing interest among businesses, particularly family-run and small to medium-sized enterprises, in incorporating Bitcoin into their treasury management strategies. The podcast delves into the unique factors that make Bitcoin appealing to these businesses, including its potential as a store of value and the long-term perspective that drives their adoption decisions.

Custody solutions are a major focus of the discussion. Baker explains the different models available, including self-custody, third-party custody, and collaborative custody. He emphasizes the importance of businesses selecting the right solution to ensure the security of their Bitcoin holdings. The podcast also touches on the challenges faced by public companies, such as regulatory uncertainties and the complexity of integrating Bitcoin into traditional corporate finance practices. While smaller businesses are more agile in their adoption, public companies face more significant barriers that slow down their adoption processes.

The podcast also explores the practical applications of Bitcoin, particularly in cross-border payments. Baker notes that Bitcoin is increasingly being used by businesses and nonprofits in regions with unstable local currencies, where it offers a more reliable alternative to traditional payment methods. The conversation concludes with a forward-looking discussion on the future of Bitcoin adoption among businesses, emphasizing the need for ongoing education, improved regulatory frameworks, and more user-friendly custody solutions.

Stakeholder Perspectives

1. Family-run Businesses: These businesses are at the forefront of Bitcoin adoption due to their long-term focus and agility in decision-making. They see Bitcoin as a stable store of value that can preserve wealth across generations.
2. Public Companies: Larger firms are more hesitant to adopt Bitcoin, primarily due to regulatory uncertainties, potential impacts on quarterly earnings, and the complexity of integrating Bitcoin into traditional financial systems.
3. Regulators: Regulatory bodies are a significant barrier to Bitcoin adoption, particularly for public companies. Clearer guidelines and favorable accounting standards could encourage more widespread adoption.
4. Bitcoin Custody Providers: Custody solutions are critical for businesses adopting Bitcoin. Providers need to offer robust, secure, and user-friendly options to facilitate wider adoption.
5. Nonprofits and International Businesses: These entities are using Bitcoin for cross-border payments, particularly in regions with unstable currencies. Bitcoin offers them a way to mitigate risks associated with currency fluctuations and political instability.

Implications

The growing trend of Bitcoin adoption among businesses, especially family-run and smaller private companies, indicates a shift in how companies view treasury management. These businesses, driven by a long-term focus and the need for a reliable store of value, are increasingly turning to Bitcoin as a strategic asset. However, for broader adoption to occur, especially among larger public companies, significant challenges must be addressed. Regulatory clarity is paramount, as uncertainty in this area remains a significant barrier. Additionally, the development of more secure and user-friendly custody solutions will be crucial in mitigating concerns related to the safety of Bitcoin holdings.

Bitcoin's role in cross-border payments, particularly in regions with unstable currencies, also represents a critical growth area. As more businesses recognize the practical benefits of using Bitcoin for international transactions, this could drive further adoption beyond its function as a store of value.

Future Outlook

The future of business Bitcoin adoption appears promising, particularly among smaller, family-run businesses that are less constrained by the bureaucratic and regulatory hurdles faced by larger public firms. As regulatory frameworks evolve and custody solutions improve, it is likely that more businesses will consider Bitcoin as a viable treasury asset. However, public companies may continue to adopt Bitcoin at a slower pace due to the complexities involved in aligning it with traditional corporate finance practices.

Another area of growth is the use of Bitcoin in cross-border payments, particularly in regions with unstable local currencies. As more businesses recognize the advantages of using Bitcoin for international transactions, this could become a significant driver of adoption. To fully realize Bitcoin's potential in the business world, ongoing education and the development of user-friendly tools and services will be essential.

Information Gaps

• How can advancements in Bitcoin custody technology influence broader business adoption? Custody technology is crucial for reducing the risks associated with holding Bitcoin. As these technologies improve, they could significantly broaden the appeal of Bitcoin to businesses, making it a more viable option for treasury management.
• What specific regulatory hurdles are most commonly cited by businesses when considering Bitcoin adoption? Understanding the specific regulatory concerns that businesses face is essential for creating a more conducive environment for Bitcoin adoption. Addressing these concerns through policy changes could encourage more businesses to integrate Bitcoin into their financial strategies.
• What factors contribute to the higher adoption rates of Bitcoin among family-run businesses compared to larger corporations? Family-run businesses have shown a greater propensity to adopt Bitcoin, likely due to their long-term focus and more flexible decision-making processes. Investigating these factors could provide insights that help scale Bitcoin adoption strategies to larger corporations.
• What are the most significant benefits of using Bitcoin for cross-border payments in unstable currency regions? Bitcoin’s utility in cross-border payments, especially in regions with unstable currencies, represents a critical use case. Understanding these benefits could encourage more businesses to explore Bitcoin for international transactions.
• How do recent changes in accounting standards impact businesses' decisions to hold Bitcoin? New accounting standards that treat Bitcoin more favorably could be a game-changer for corporate adoption. However, the full impact of these changes is yet to be seen, and understanding their influence is crucial for anticipating future adoption trends.

Broader Implications for Bitcoin

Evolving Corporate Bitcoin Adoption

The growing interest in Bitcoin among businesses, particularly family-run and smaller private companies, indicates a shift in corporate treasury strategies. These companies view Bitcoin as a viable long-term store of value, potentially transforming traditional approaches to asset management. As more businesses adopt Bitcoin, this trend could encourage larger companies to follow suit, particularly as regulatory frameworks become clearer and custody solutions improve.

Regulatory and Policy Developments

Regulatory clarity remains a significant barrier to wider Bitcoin adoption among public companies. However, as governments and regulatory bodies refine their approaches to Bitcoin, there is potential for more favorable conditions that could lead to increased corporate adoption. The evolution of accounting standards and legal frameworks will play a crucial role in determining how quickly and broadly Bitcoin is integrated into corporate financial strategies.

Bitcoin in Cross-Border Commerce

The use of Bitcoin for cross-border payments, especially in regions with unstable currencies, represents a critical growth area. As businesses recognize the advantages of Bitcoin in mitigating currency risks and reducing transaction costs, this use case could drive broader adoption. If Bitcoin continues to prove its utility in international commerce, it may become a standard tool for businesses operating in volatile economic environments.