Good morning,
“CFOs shouldn’t be pushing to jump into holding crypto just because it’s the future or because Elon Musk says so,” said Kevin Werbach, professor of legal studies and business ethics at The Wharton School. “But I would urge them to understand it better.”
Many finance chiefs are reluctant to put Bitcoin on the balance sheet because of its volatility. For example, Twitter CFO Ned Segal said last month that it doesn’t make sense for the company to invest in crypto assets at this time, the Wall Street Journal reported. Twitter’s preference is to hold securities and assets whose prices fluctuate less, Segal said.
During Wharton’s virtual press briefing on Wednesday about 2022 predictions in finance, crypto, and real estate, Werbach said the crypto markets have “evolved a tremendous amount.” Although assets like Bitcoin have been around for a long time, the maturity of the markets and platforms around the digital currency, “are light years ahead of what they were three or four years ago,” Werbach said.
“There are a few companies like Tesla, who are holding Bitcoin on their balance sheet really for ideological reasons,” he explained. “But there are reasons why companies might actually want to hold these assets—partly as a store of value as an inflation hedge, and partly for international cross border transactions. For multinationals, who have a great deal of expense in moving assets and value around the world, conceptually, cryptocurrencies make sense as a way to address that problem.”
“This has been a crazy year for everything having to do with cryptocurrencies and digital assets, but also one where we’ve seen a tremendous amount of real activity,” Werbach said. Crypto and digital assets became normalized with a “massive increase in retail trading activity,” he said. The professor also pointed to Coinbase becoming the first crypto company to trade on the Nasdaq. And there was notable activity among platforms like Square (now known as Block), PayPal, and Robinhood,” Werbach said. “About half of the crypto traders in the U.S. got into the market in the last year,” he said. Another area of blockchain growth this year was the rise of NFTs, non-fungible tokens, he noted.
“What is 2022 likely to be?” he said. “Even crazier.” You’ll hear a lot about metaverse and Web3. “There is tremendous investment going into metaverse—virtual and augmented reality systems,” Werbach said. “The idea of having a virtual world with assets that people can actually own immediately and that can be integrated and taken across different platforms is a perfect and natural fit for blockchain and digital assets.” The metaverse is growing but will take some time to reach full actualization, he said.
In the Web3 iteration, “cryptocurrencies and blockchains represent a new generation of the internet,” Werbach said. Web2 is defined as being social media and mobile fueled, which resulted in “a small number of platforms being dominant and controlling people’s interactions online,” he explained. “Now, there will be this new crypto way, which is more decentralized and more open,” Werbach said. However, it’s in the early stages. “Most of the activity is still financial speculation,” he said. “Most of these platforms are still really immature.” But the intersection of crypto and the video game industry is more advanced, he noted.
Werbach also foresees a correction in the crypto market. “I’m not predicting any specific timing,” he said. “But we’ve seen time and time again 80% corrections in Bitcoin and other major cryptocurrencies.” And there will also be more regulation in the U.S. and rule-making by the SEC. “We’re going to have action on stablecoins,” Werbach said.
See you tomorrow.
Sheryl Estrada
sheryl.estrada@fortune.com
Big deal
Freelance Forward: 2021, a report by Upwork (Nasdaq: UPWK), a freelancing platform, found the percent freelancing in 2021 remained constant at 36% of the U.S. workforce. Skilled freelancing "continues to grow, and as a result those with the most education are freelancing more than ever," Upwork Chief Economist Adam Ozimek noted in the report. In 2021, 53% of all freelancers provided skilled services such as IT, marketing and computer programming, up from 50% in 2020. About two-thirds of respondents said they are optimistic about their career outlook in 2022, compared to 58% non-freelancers, the survey found. Upwork’s eighth annual study surveyed more than 6,000 U.S. workers over the age of 18.
Courtesy of Upwork
Going deeper
The Future 50: Growth stocks to bet on in an unpredictable world is the recently released fifth edition of an index created by Fortune and management consulting firm BCG. The index is based on two pillars: a top-down, market-based assessment of a company’s potential, and a bottom-up analysis of its capacity to deliver growth. CrowdStrike Holdings, a cybersecurity tech company, earned the top spot on the list this year.
Leaderboard
Ashley George was promoted to CFO and SVP of global finance at Fortune Brands Global Plumbing Group (GPG), a division of Fortune Brands Home & Security, Inc. (NYSE: FBHS). George joined GPG in 2018 as VP of finance, bringing with her more than 20 years of experience in finance, cross-functional leadership, business analysis and strategic planning. Prior to her current role, she was responsible for leading global FP&A for Moen North America and the global finance organization for House of Rohl. Preceding her roles with GPG, George spent 18 years in finance with Kimberly-Clark.
Spencer Williams was promoted to EVP and CFO at Populus Financial Group, Inc., a digital and retail financial services provider. Sue Pressler will retire as CFO and take on the new role of executive advisor. Williams joined Populus 10 years ago and currently serves as SVP of finance. During his tenure, Williams has gained experience in finance, accounting, treasury, and risk.
Overheard
“I really do believe we are building a new global economic infrastructure layer.”
—Jeremy Allaire, the chief executive of the payments company Circle, one of six cryptocurrency CEOs who testified on Wednesday before the House Financial Services Committee about the state of crypto, as reported by The New York Times.
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