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Time to Embrace Digital Currencies?

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Digital currency technology is gaining more interest as the foundation for business financial transactions. While few utilities have now adopted technologies, like blockchain, a growing number are examining them, according to a Gartner survey. The software architecture has the potential to streamline, lower costs, and offer higher levels of security for financial transactions. But, it is new and volatile, so energy companies are moving cautiously into this space.

Close to half (47%) of finance leaders plan to examine digital currencies for their business transactions in 2022, according to Gartner, Inc. In February, 84% of finance leaders said they would never hold bitcoin as a corporate asset and pointed to a range of risks associated with holding the currency.

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So, sentiment towards digital currencies has been rapidly changing. Why? Digital currencies are maturing, and successful use cases have materialized. Consequently, energy company executives have become more willing to look at what others are doing with them and whether or not others’ experiences can be applied to their own organizations.

What is Blockchain?

There are misconceptions about blockchain. Digital currencies, such as Bitcoin, and blockchain are often incorrectly conflated as the same thing. Blockchain is a digital ledger (one used as the foundation for Bitcoin transactions) in which each cryptographically signed record contains a timestamp and reference links to previous transactions. The records on a blockchain ledger are irrevocable and are shared by all participants in a network. The technology has many potential benefits for utilities:


Reduce Transactional Finance Costs — Streamline flows of payments to and from customers and suppliers (order-to-cash and procure-to-pay).

Lower Payroll Costs — In time, certain employees may request compensation in bitcoin, so compensation payments become more seamless.

Reduce Legal Costs — Smart contracts automate payments once an obligation is fulfilled, including the providing legal proof of deed or rights.

Audit Supply Chain — Manage complex, fragmented, distributed supply chains across organizational and geographic boundaries. The technology is especially good for fraud prevention because it verifies the origin and path of product components.

Manage Physical or Digital Assets — it provides permissioning, access, and identity verification of physical or digital assets.

Record Internal Transactions — Help large complex organizations reconcile multiple databases and track cross-charges, providing a single source of truth.

Minimize Audit Costs — Create a standard, automated way to audit, which minimizes the chances of any biases affecting an audit’s findings.

But adoption of blockchain and digital currencies in most energy companies may not happen right away because of various barriers. Blockchain is a new technology, one whose design is much different than traditional systems. Energy companies need to develop the skills to deploy and manage it. Also, blockchain currency valuations have fluctuated, sometimes wildly, so energy companies may be unwilling to adopt it.

Utilities have not been leery of digital currencies; however, its potential benefits and growing maturity are changing some minds. As a result, a growing number are at least monitoring the technology’s evolution with an eye toward how it soon may help them. 
 

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