Corporate crypto wallets introduction
In the peer-to-peer world of cryptocurrency, crypto wallets were first designed with the individual user in mind.
However, with corporate adoption of digital assets becoming increasingly mainstream, wallet technology has evolved to meet the more complex needs of large corporations and institutions.
In this article, we’ll cover the key differences between small business and enterprise crypto wallet solutions. We’ll also look at the advanced functionality that enterprise users should look for in a wallet provider.
Background reading: Crypto wallets: 5-minute guide
Crypto management options for business
Just as there are now many options for consumers in the crypto sphere, there are a range of solutions for businesses wishing to branch into crypto.
Not all of these require them to manage their own crypto wallet per se. Let’s look at some of the options for non-crypto native businesses.
Accepting payments in crypto
For companies that simply wish to accept crypto payments in exchange for goods and services, a third-party payment gateway provider may be sufficient. Paypal, Stripe and Square are just a few examples of companies that offer this service.
This may be a good solution for small to medium businesses that are looking to simply diversify the payment options for their customers, without having to buy or build systems to hold crypto themselves.
With a Paypal merchant account, for example, a small business could allow their customers to pay in crypto but receive the payout themselves in USD.
Crypto exchange accounts for business
For enterprises and institutions that wish to hold crypto as a treasury asset within a balanced investment portfolio, a third-party solution may meet their needs.
Some crypto exchanges allow companies to apply for business accounts to buy and sell crypto.
Exchanges have on and off-ramps for fiat, meaning that they allow users to exchange crypto for highly regulated currencies such as USD. Because of this, there are often stringent KYC (Know Your Customer/Client) procedures for new business customers to go through.
Not all businesses are eligible for such accounts, depending on which field they operate in, where they are based, and other factors that can affect their risk profile as assessed during KYC.
If a business is looking to hold crypto as an investment asset, then they may also consider using a digital asset custody service. This is often the preferred choice for large enterprises and institutions.
The benefits of institutional-grade custody include enhanced security, with robust authentication measures required before a customer can access their holdings.
This benefit can also be a drawback, however, should treasury teams need fast or regular access to their crypto funds.
Hardware wallets for business
Hardware wallets primarily serve the retail market, as an offline (cold storage) solution for users who wish to manage their own keys rather than rely on a third party.
The oft-repeated phrase here is "not your keys, not your coins" – meaning that if key management is outsourced, the user does not have true sovereignty over their crypto.
Due to their very nature, hardware wallets – which could be a USB drive, computer hardware or similar – can be impractical for large or distributed treasury teams, since the users must be in the same geographic location as the device.
There is also the question of the software used to operate a hardware wallet.
Is it open source or is it proprietary? If it’s the latter, there is a risk that, should the company cease operating, the software needed to run the wallet would stop being maintained.
A new generation of hardware wallets
To reflect the growing enterprise demand for crypto wallets, some hardware wallet providers have scaled their offer to provide self-custody solutions, with Ledger’s enterprise vault being one example.
Corporate crypto wallet requirements
As we have seen, corporate crypto wallets can take different forms.
Whether their keys are entrusted to third parties (in the case of exchanges or custodians) or managed in-house through a self-custody solution, enterprises have a number or requirements that don’t apply for individuals or small businesses.
It goes without saying that enterprises have an operational complexity that far exceeds smaller companies and the retail market.
And as security technologist Bruce Schneier wrote in a much-cited 1999 essay, complexity is the worst enemy of security.
To manage this risk, enterprise crypto wallet platforms need sophisticated storage solutions that may need to combine cold, hot, and warm wallets, or even a bespoke self-custody solution built to accommodate a client’s specific business needs.
In addition to granting multiple team members wallet access, corporate wallet platforms should allow businesses to maintain several different wallets.
A business is likely to require at least two wallets: a treasury wallet for reserves held on the balance sheet, and an operational one for sending and receiving payments. From there, wallet requirements can scale depending on business needs.
They may require a separate wallet for crypto payroll, for example, or a set of internal wallets that are used solely to hold and transfer funds within different parts of the business.
Such arrangements can help companies that are geographically distributed manage operations such as payroll without the friction of dealing with cross-border payments.
The raw data that can be extracted from blockchain records is not in itself compatible with legacy financial systems, and the reality is that replacing such systems is neither an affordable nor a practical solution for most enterprise users.
Therefore, any crypto wallet service needs to offer reporting integration on some level. This is because the more manual processes required to report on a business’s crypto activities, the bigger the knock-on effect on treasury teams, and the less scalable such operations become.
Good reporting is not only essential from a reporting and compliance point of view, but also vital for business intelligence.
To learn more about this in the context of Bitcoin, see our article on best practices for Bitcoin bookkeeping.
Data analytics capabilities
Studies show that data analytics is playing an ever more important role in treasury operations.
In just one example, a 2020 survey of treasury professionals across Europe found that 62% use, or plan to use data analytics, compared to 43% in 2019.
A separate study by Citi found that while corporate treasurers are heavily focused on adopting new diagnostics technology, legacy tech stacks are struggling to meet this demand.
A corporate crypto platform that is fit for purpose will support this increasingly data-led approach to treasury management, rather than further complicate it with laborious manual processes.
Finally, a corporate crypto wallet needs to grow with the business. This is especially the case for businesses that are not crypto-native and entering the ecosystem step by step.
Beyond wallets: full operational integration
To benefit from the many benefits of digital assets, from being ahead of the curve on crypto payroll to making efficient cross-border payments, corporates need solutions that bring this new technology into the heart of their business.
The challenge is to do this without radically overhauling their existing software and systems.
Fortris has a proven track record in providing financial tooling for enterprise-level digital asset operations.