Why it's harder than ever for crypto businesses to easily move funds in and out of crypto.
Happy Thursday crypto advisors 🌞
It's morning. The coffee is brewing, the sun is shining, and the birds are singing. All seems right in the world — especially after your team crushed their first NFT drop with a sold out collection earning 800 ETH.
Now what? As CFO, you're responsible for liquidating those tokens into fiat as quickly and painlessly as possible. But with the distinct lack of business-focused exchange solutions, that's easier said than done. In today's edition, we'll break down the on/off ramp challenge for businesses and explore some potential solutions.
This week’s topic
💸 Why On/Off Ramping is Hard
Trader-focused crypto exchanges, like Coinbase Prime and Kraken, are designed to optimize trading — not quickly moving money in or out. User interfaces can be clunky, complex and confusing for those unfamiliar with the inner workings of cryptocurrency.
Yet this is pretty much the only option for businesses today.
To make matters worse, major crypto exchanges don’t offer an automated way to off-ramp funds to a bank account, nor do they make it easy to initiate crypto payments via a bank account in a single step.
As a result, businesses are exposed to volatility in the value of their crypto assets as they temporarily hold crypto on their books.
Enter heaps of new complexity:
The need for a treasury management strategy and team member assigned to trading
Potential loss of profit due to price swings
New financial reporting requirements
New tax liabilities
Suddenly the sun is no longer shining, and the birds have stopped signing.
Solving this challenge is key to growing the adoption of crypto.
Last year, I had high hopes that 2023 would see the introduction of new, streamlined crypto exchange offerings for businesses. This was based on a number of discussions I had with both new startups and existing players working on the problem.
However, banking issues have plagued the crypto industry in recent months, adding an extra layer of complexity to the equation. After FTX unraveled in late 2022, shockwaves rippled through the banking industry. Silvergate is shutting down, Metropolitan has exited the market, and Signature is drastically reducing their exposure to crypto. Suddenly, crypto startups focused on solving liquidity challenges are struggling to find banking partners.
In a Perfect World...
Ultimately, businesses need an exchange platform that's optimized for speed and simplicity — one that allows them to easily move between fiat and digital currencies quickly and securely. This type of solution should also have easy-to-use user interfaces designed specifically for business users so they don't get caught up in all the technical complexity of trading platforms. Finally, automated tools should exist to make off-ramping funds
Hope on the Horizon
We regularly get requests from our customers about the best options for crypto exchange. While Gilded has no intention of becoming a player in the space, I’m in touch with a handful of firms in stealth mode that look promising. If simplified crypto exchange is a pain point you're currently wrestling with, let me know and I'll be happy to put you in touch.
📚 What We’re Reading
Following the implosion of FTX, top crypto-friendly bank Silvergate Bank is struggling and Signature Bank is cutting back on working with crypto customers, leaving crypto companies without banking options. Although smaller banks like Customers Bank, Cross River Bank and fintechs like Mercury welcome crypto businesses, they remain selective in their work due to risks posed by the industry.
Breslow’s tumultuous relationships with Wyre, Prime Trust, and Zero Hash underscore some of the many hurdles faced by the consumers and providers of crypto on/off ramp services.
The episode highlights yet another chokepoint for the blockchain industry: It's become harder for crypto startups to enlist big accounting firms to do audits and asset attestations.
Fascinating from an accounting perspective. When you purchase NFTs on Uniswap’s platform Genie, you can pay in an ERC20 token and Uniswap automatically converts it to the token the seller is requesting. To both parties it appears they are transacting using their desired currency. When factoring in trading fees and slippage, a discrepancy is created between the value of the asset as perceived by the buyer and seller. In other words, value is in the eye of the beholder.
Work in Web3
👾 Web3 Accounting Job Alert
Kraken, one of the largest and most trusted crypto exchanges, is currently hiring a remote Accounting Manager. The accounting manager will be responsible for supervising and managing the accounting department and all areas of financial reporting.
Is your crypto accounting data safe and secure? Yes, with Gilded.
We’re proud to announce that Gilded has achieved SOC 2 compliance! 💯
This is just another example of how we’re dedicated to safeguarding our customers’ data and ensuring the highest standards of security.
That’s all I got for this week! If you found today’s newsletter useful, feel free to share with your network to spread the word about Crypto Advisors.
Brought to you by Gilded 💡
This newsletter is strictly for informational purposes only and does not constitute financial, investment, or tax advice. As always, do your own research.
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