Crypto and blockchain: 5 questions every board must ask

Why understanding the opportunities and dangers of Bitcoin and other cryptocurrencies is now essential for directors.

US President Donald Trump declared “crypto is the future” in a video on X. He’s called on people to “embrace this incredible technology”. But what do directors need to know?

Virtual assets have seen price growth amid significant capital inflow in recent weeks, with KPMG predicting further mainstream adoption in its 2025 Outlook.

The number one recommendation for directors is to keep an open mind, according to Professor Gavin Nicholson FAICD, Associate Professor in the School of Accountancy at the QUT Business School, Queensland University of Technology.

“It’s a very complex and broad issue, and because there is so much uncertainty surrounding this particular technology, it’s difficult to have a mental model with which to assess it,” says Nicholson. “You can’t think critically if no amount of evidence will change your mind. It is better approached more specifically. Why would your organisation want to be involved in a specific cryptocurrency? I don’t even like using that word, because is it a currency? Is it security or a technology?”

Five crypto questions every board must ask

Whether considering crypto for payments, investments, partnerships or broader strategic initiatives, directors must take a governance-led approach to assessing its role in their organisation.

Finance journalist Lel Smits, last year’s Director of the Year at the Women in Finance Awards and a director at the Australian Shareholders’ Association, has outlined five key questions boards should consider when engaging with cryptocurrency.

1. How do we decide if we want crypto?

Directors have a duty to act in the best interests of their organisation and its shareholders, meaning any decision to engage with cryptocurrency must be carefully evaluated. It is important for directors to consider:

• Australia’s regulatory framework for cryptocurrency is evolving and directors should ensure compliance with Australian financial and tax obligations.
• Cryptocurrency markets are highly volatile, which could impact financial stability and forecasting.
• Cybersecurity risks, including hacks and fraud, should be assessed upfront.
• The strategic fit needs to be considered, such as whether cryptocurrency aligns with the company’s business model.
• Stakeholder sentiment is always changing and needs to be monitored.

2. How will it affect our credibility?

Key considerations include:

• The legitimacy of the counterparty. Directors should assess a company’s financial standing, regulatory compliance and ethical standards before engaging in financial dealings with them.
• Associating with cryptocurrency firms could expose organisations to market speculation or association with unregulated entities that causes brand damage.
• Trading or holding crypto assets carries a financial risk due to the asset classes’ extreme unpredictability. Companies must consider risk mitigation strategies, including hedging and treasury management.
• The many crypto scandals mean caution is prudent, particularly if your ethics may be called into question.

3. Is our reputation in danger?

Cryptocurrency remains a divisive topic:

• An investor backlash from aligning with cryptocurrency could occur as some institutional investors and shareholders may view it as overly speculative, increasing concerns over risk exposure.
• Regulatory scrutiny is to be expected when dealing with cryptocurrency. Boards embracing it must be prepared for potential compliance issues and ASIC and the ACCC continue to monitor crypto-related activities.
• Stakeholder perception is important to consider, as cryptocurrency is still viewed negatively by some.

4. Should we accept payments in crypto?

The financial stability of the company could be jeopardised if prices fluctuate wildly.

• Regulatory compliance is an important consideration as directors should understand Australian taxation rules, particularly regarding capital gains tax (CGT) implications.
• Liquidity and convertibility could involve transaction fees, delays and counterparty risks.

5. How and why should directors think about crypto?

Directors should approach cryptocurrency with caution, due diligence and strategic foresight. Key reasons to engage with crypto-related discussions include:

• Emerging market trends have shown cryptocurrency continues to enjoy adoption. Digital assets and blockchain technology are evolving and directors should stay informed on industry developments to make informed decisions.
• Embracing cryptocurrency could provide a competitive advantage. For example, if crypto adoption aligns with business strategy, it could provide a competitive edge, particularly in tech, finance and global trade sectors.

Not enough protection

Cryptocurrencies such as Bitcoin and Ethereum currently lack the regulatory protections that stocks and bonds enjoy. For a board of directors, there are many issues to consider such as risk management and operational performance. Blockchain can be used for the assertion and protection of intellectual property rights. It’s being developed to gatekeep digital identity to help prevent identity theft and fraud, but naysayers argue there still aren’t enough appropriate oversights are in place. And the social and governance parts of a board’s ESG responsibilities when using cryptocurrencies are also being closely examined.

“There is so much benefit with blockchain/digital assets, for example, around the traceability of your supply chain or the authentication of your goods,” says Caroline Bowler AAICD, CEO of BTC Markets, an Australian crypto and Bitcoin exchange.

Scam danger

Understanding how the specific technology may it within your business model, and what the uncertainties could be is important for the board to establish very early in the debate, says Nicholson.

“Those uncertainties are a bit broader with this technology,” he says. “There’s everything from reputation risk — because it’s potentially just seen as dealing with a scam — to ESG concerns about the amount of energy it takes, through to the hacking of the actual technology.

“It’s wise, as an emergent technology gains traction, that directors have a working understanding of all the issue.”

But do boards want to be “forward scouts” when adopting cryptocurrencies? It may be more beneficial to shareholders if their boards sit back and observe whether early adopters successfully implement blockchain initiatives. To date, some have not.

Value and uncertainty

The board has to be able to understand how blockchain can create value and how to capture that value.

“They’re not investing in crypto, necessarily,” says Nicholson. “It’s about how you might use the technology that underpins some of these coins. For example, if you’re a ticketing agency, you might discover you can move all your tickets digitally and somehow decrease your cost base and increase the value, because you would never lose the virtual ticket. For people who collect memorabilia, now you’ve got a better product because it is verifiable that this is the virtual ticket to Woodstock.”

He explains that some organisations could create value more naturally than others, but a lot of uncertainty remains whether people will adopt possible use cases.

“If you have a high demand service many people want — think limited luxury goods — you might limit customers by making them use your own corporate coin,” says Nicholson. “If demand is strong — and using the coin is easy enough — people will acquire that coin in order to buy from you. That makes that coin worth something, and the greater the demand, the higher the cost of the coin — if you limit supply. Counter-intuitively, you can make money from the coin’s appreciation, because you have captured the value of what people will pay by having a fixed coin price that translates to ‘floating’ price in fiat.”

Jet-propelling share values

Financial services around the world are moving on to digital assets, notes Bowler. “By that, I mean your company stocks will become a digital asset. We started in a paper-based system that moved on to a digital format. The digital asset we’re talking about means we’re putting that company share within the blockchain ecosystem. We’re putting a jet pack on the back of that company share through tokenisation and it’s going to reimagine financial services globally, completely rewriting existing structures around financial services in their entirety.”

Currently, shares are siloed at national level, unless you have a dual listing. “That model will fade and instead we will tokenise company shares to become a tokenised listing, which can then be listed potentially anywhere,” predicts Bowler. “It’s a structural product, traded on chain and built on chain. It means it doesn’t have to be traded in Australia, it can be traded anywhere.”

Nicholson adds that boards suffer when there are too many people looking for the problem, instead of looking for the opportunity and how to create value. “It’s one of those areas where it’s very easy to come up with a lot of reasons about why you shouldn’t do something, rather than saying, actually, a lot of people have made a lot of money, and given this has happened over 14 to 15 years, and there are known uses of blockchain technology, there seems to be something in it.”

Ultimately, directors need to balance innovation with governance and understanding the risks, while evaluating whether cryptocurrency offers meaningful value to their organisation or company over the long term, says Smits.