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Treasury

Digital currencies will force change across cash management

Widespread use of digital currencies will reshape the way liquidity is managed, but it will also force banks and corporates to move away from long-established practices.

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Digital currency transactions could require banks to change the way they manage their intraday liquidity to enable clients to make instant payments. Faster transaction settlement may also affect corporate intraday liquidity management and optimization strategies by enhancing the confidence levels with which treasury teams manage their inbound and outbound requirements, according to a BNY Mellon report published earlier this year.

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Ole Matthiessen, Deutsche Bank

“With digital currencies aiming to optimize these challenges, the adoption of standardized protocols allowing for them to be used in treasury practices will be key to ensuring greater speed also results in certainty,” says Deutsche Bank’s head of cash management, Ole Matthiessen.

Corporate treasurers are most likely to be interested in digital currencies that are cash equivalents from an accounting perspective, suggests Stephen Randall, global head of liquidity management services, treasury & trade solutions at Citi.

“These cash-equivalent digital currencies may also facilitate faster settlement on a 24x7 basis and open up intriguing possibilities due to the ‘programmability’ of tokenized currencies,” he says.

In this scenario, treasurers won’t necessarily need to hold excess liquidity buffers in anticipation of last-minute obligations – instead, they can deploy consolidated cash more effectively, for example to pay down debt or invest, explains Priyanka Rath, global head of liquidity solutions specialists in JPMorgan’s wholesale payments business.

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