Anndy Lian: Why do you need to hire a Chief Bitcoin Officer?

Dataquest India, India's largest IT publication has published my piece on "Why do you need to hire a Chief Bitcoin Officer? in their June 2021 edition. In this article, I have talked about the importance of having a CBO and how it will help moving forward. 

Why do you need to hire a Chief Bitcoin Officer?

Bitcoin has drawn many naysayers since it hits us years ago. Some called it an online scam, while others call it fake money. This coin was created in January 2009 by the mysterious Satoshi Nakamoto.

The whitepaper illustrates a network that allows lower transaction fees compared to the traditional methods and unlike central bank-backed currencies, bitcoin is operated in a decentralized environment. The value of one bitcoin was $0 when it was first introduced in 2009 and when bitcoin first started trading from around $0.0008 to $0.08 per coin in July 2010. Today, it is more than $57,000.

Bitcoin has gone past the getting-to-know stage and right now I dare to say that more people know about bitcoin. It is often described as a cryptocurrency, a virtual currency, digital currency or a store of value. Depending on where you are located, you will see shops accepting cryptocurrency. With online payment service giant, PayPal allowing its customers to buy and sell bitcoin, this will truly open up to more usage.

PayPal is not the only publicly-traded company that is into the king of cryptocurrencies. Many other publicly traded firms have adopted bitcoin as a form of reserve asset and hold direct control over their bitcoin funds.

Top 6 Public Companies with the Biggest Bitcoin Portfolios

1) MicroStrategy Inc 91.579

2) Tesla, Inc 43,200

3) Square Inc 8,027

4) Marathon Digital Holdings 5,263

5) Coinbase Global, Inc 4,487

6) Galaxy Digital Holdings 4,000

Total: $9.05 trillion (BTC: $57,810)

Top 3 Private Companies with the Biggest Bitcoin Portfolios

1) MTGOX K.K 141,686

2) Block.one 140,000

The Tezos Foundation 24,808

Total: $17.72 trillion (BTC: $57,810)

Top 3 ETF like Funds with the Biggest Bitcoin Portfolios

1) Greyscale Bitcoin Trust 654,885

2) CoinShares/ XBT Provider 69,730

3) Ruffer Investment Company 45,000

Market cap $44.49 trillion (BTC: $57,810)

(Data contained from Bitcoin Treasuries.)

The list above excludes the recent banks such as Morgan Stanley and Goldman Sachs who are offering bitcoin to their wealth management clients. These companies together manage about trillions of dollars too. I have also excluded governments or government-linked entities that are holding bitcoin. For example, it is reported that Ukrainian officials are holding over $2.6 billion in bitcoin.

As you can see, the bigger corporations are putting bitcoins to their balance sheets. They need subject matter experts to advise them on how they should manage their bitcoin holdings. This is the reason why I have emphasized that companies should start to look at hiring their very own Chief Bitcoin Officer (CBO).

This role should be on the same level as the Chief Financial Officer but the CBO will look at the cryptocurrency side of things. It is also good that this key appointment holder has relevant experience dealing with the government on crypto regulations and understand finance or fund management. Handling bitcoin and other cryptocurrencies are not an easy task. You will need dedicated resources and expertise.

Regulatory risks

There are still isn’t a blanket approach for bitcoin for all governments. Though governments understand bitcoin, they do not embrace it all. Bitcoin is still seen as the rival to fiat currency. Creating Central Bank Digital Currencies or CBDC is one way to track the flow of money and possibly the flow of bitcoin.

For example, for U.S. taxpayers, it is known that anyone with more than $10,000 digital currency aboard needs to fill out the Report of Foreign Bank and Financial Accounts (FBAR). This rule could have changed and the everchanging rules may be a legal concern for many. When governments start to regulate, ban or restrict bitcoin, CBO will be the first to know and act accordingly.

Security risks

CBO needs to look at security risks. Hackers often target bitcoin wallets and exchanges. As we all know, bitcoin transactions are permanent and irreversible, there are no third party to retrieve your loss coins. Putting your bitcoin with the centralized exchanges are the closest to how you keep your money in a bank but bear in mind that there are cases where exchanges got hacked and millions of dollars were wiped out overnight.

Cryptocurrency exchanges are constantly improving their security measures but this does not mean that it is 100% safe putting your coins in one single basket. There are other instances where the founder of the exchange got arrested by the police and withdrawals were stopped for weeks. So, if your company has a big holding of bitcoin, it is important to place them in the right wallets catered to the investment strategies and with the right set of security features.

Market risks

Bitcoin’s price can fluctuate a few thousand dollars each day in today’s context. It is volatile. The unexpected changes in the market sentiments can lead to sharp and sudden price movements. It is also subjected to the high volume of buying and selling on exchanges and movements by bitcoin whales. Bitcoin has also fallen more than 80% in 2014 in a single day.

CBO needs to be ready for such fluctuations. He or she has to look at the latest market news, who are the latest institutional investors, at what price they came in at, when is the next halving, is there a new fork etc. Take hard forking for instance. When it occurs, the market may experience sizable price volatility around this event and we may see suspended trading or ununiformed prices or price differences in various exchanges.

If you are into bitcoin and your company bought a sizable amount of bitcoin, these are some of the things you need to take note of. The job of a CBO is not easy and it is a specialized role.

When I posted this on Twitter, I have people coming to me asking if this is applicable for SMEs? My reply to them is that if your SME is forward-looking, you should also start to look at this as well. You may not be hiring a Chief Bitcoin Officer, because of it price. So maybe a Chief Litecoin Officer or a Chief Crypto Officer.

So hire your Chief Bitcoin Officer today.

Author: Anndy Lian

You can download the magazine at this link.