Kyriba's "Currency Impact Report" released earlier this year found that in Q3/2021, North American businesses mostly experienced "tailwinds"—swings in foreign exchange (FX) that increased their earnings per share by 4 cents on average. Treasury & Risk spoke with Kyriba's chief evangelist, Wolfgang Koester, about what that result should mean for corporate FX strategy.
In the first part of the conversation, Koester worried that because the FX impacts were mostly positive in the third quarter, companies might ignore the near certainty that currencies will soon swing in the other direction. He expressed that inflation and global uncertainty will likely strengthen the U.S. dollar.
Recommended For You
But when we asked him what other trends he expects to impact currencies in the near future, the conversation turned to the digital.
Treasury & Risk: What other trends do you see impacting FX volatility in the near future?
Wolfgang Koester: Even as funds are flowing into the U.S. dollar, competition for that safe-haven status will be ramping up in the form of China's electronic currency. This is something that a lot of executives and treasury professionals haven't really bought into. But corporations need to be prepared for a fundamental change in the global monetary system. It is coming, and it is going to center around central bank digital currencies, or CBDCs.
We all need to be evaluating what role cryptocurrencies [private digital currencies like bitcoin] will play in the future global economy, and what place CBDCs will have. More and more central banks are looking at this—around 80 percent of central banks around the world are currently considering issuing a CBDC. A lot of African nations are ahead of the curve. A lot of Asian governments are looking to follow closely behind China. Some European nations, like Switzerland, are very active in CBDC research. Israel is very active in it, as well.
The United States is also moving forward, although more slowly and deliberatively than some other countries. In March, President Biden signed an executive order mandating that government agencies continue to evaluate, and provide policy recommendations on, the pros and cons of a digital dollar.
This shift is going to happen. Companies that are not ready to manage the risks inherent in digital currencies are going to be at a competitive disadvantage.
T&R: Do you have a sense of timing? Are you thinking digital currencies will have a significant presence in the global economy in five years?
WK: Actually, I think it will happen more quickly than that. I think the global economy will almost mandate that it does. When you think about it, CBDCs are going to take payments from two- or three-day settlement to immediate settlement at a fraction of the cost. This will significantly accelerate the global supply chain, which in turn will have a positive impact on global economics.
So, this is going to happen sooner rather than later. I don't see it taking five years. It's quite frankly going to be dictated by the speed of the Chinese, and I think they're being very smart in their approach. Russia went to the global financial markets and tried to dictate that everyone accept the digital ruble, and everybody said no. By contrast, the Chinese began trickling the digital yuan into markets with very low-value transactions. And as the digital yuan spreads out through these transactions worth $10 or less, it becomes increasingly hard to take away.
There's a chance the digital yuan might end up becoming the global currency going forward. Now, the U.S. still has a vast say in this, but it's a question of timing. If the digital dollar debuts two or three years after the digital yuan, then the global economy might well shift to be more oriented to the Chinese currency and less U.S. dollar–focused.
But back to the point of preparation: Whatever digital currencies end up dominant, when the transition to real-time settlement via CBDCs arrives, it will come overnight and you won't be able to scramble fast enough if you haven't prepared in advance.
T&R: And we have talked about this before, but what do you think companies should be doing today to prepare for digital currencies?
WK: Treasury and finance teams need to get their financial house in order so that corporate systems and processes are ready for real-time settlement and reconciliation. Whether it's through the RTPs [payments via the Real-Time Payment Network], Zelle, or some other platform, people around the world want faster reconciliation.
In corporations, what this will look like is: When a cross-currency transaction happens, it will come directly out of the ERP system. The bank will track and execute it automatically under defined circumstances, and the company will come back in with reconciliation and debits and credits to be posted. This will all happen in real time.
This is the world we're moving toward, and frankly, it's the world we're already living in, partially. It's just not mandatory yet. But it will become mandatory pretty quickly after CBDCs become widely accepted. Companies that can't keep up will have much more expensive and much less efficient settlement of cash.
So, imagine that as a supplier, I'm working with Company A and Company B. I know that with Company A I'm going to get paid immediately, whereas with Company B it will take two days for settlement. And that delay with Company B means the transaction will incur both credit risk and currency risk, whereas with Company A, there is no risk because I'm just getting paid as soon as the transaction happens. That gives Company A a huge competitive advantage.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
