Board directors’ guide to crypto
My colleague David Crosbie and I have written a series of articles for Directors and Boards magazine.
I. A Brief History of Bitcoin and Blockchain
Early Foundations (1991–2008):
The conceptual foundation for blockchain was laid by Stuart Haber and W. Scott Stornetta, who proposed a cryptographic method for time-stamping digital documents. This created an immutable sequence of data blocks—a precursor to the modern blockchain.
The Emergence of Bitcoin (2008–2009):
Bitcoin was introduced in 2008 via a white paper by the pseudonymous Satoshi Nakamoto. In January 2009, the Bitcoin network went live with the mining of its first block. Bitcoin offered a decentralized peer-to-peer method of transferring value without a central authority, using a secure blockchain ledger.
Growth and Diversification (2010–2020):
Bitcoin gained traction as both a store of value and speculative investment. Ethereum’s launch in 2015 added programmability through "smart contracts," enabling decentralized applications. Thousands of other cryptocurrencies and token types emerged to serve new use cases.
Mainstreaming and Regulation (2020–2025):
As prices surged and adoption grew, regulators and institutions entered the space. ETFs, corporate balance sheet holdings, and regulatory clarity (especially in stablecoins and token classification) brought crypto into traditional financial conversations. The SEC, EU (via MiCA), and global standard-setters are creating clearer frameworks. The US passed the GENIUS Act regulating stablecoins in July 2025 and regulators have a year to issue final implementation rules. The Act will come into effect late 2026. The US Congress is also considering the Digital Asset Market CLARITY Act (CLARITY), which would define the market structure for digital assets.
II. Market Size and Scope (as of May 2025)
Total Crypto Market Capitalization: ~$3.2 trillion
Bitcoin Share of Market Cap: ~59%
Stablecoin Market Value: ~$250 billion
Total Cryptocurrencies in Existence: ~17,000
Global Crypto Users: Over 560 million
Stablecoins alone processed over $27.6 trillion in payments in 2024—surpassing the combined volume of Visa and Mastercard. Projections suggest stablecoins in circulation could rise to $1.6 trillion by 2030.
III. Key Concepts for Directors
Cryptocurrencies are nothing new – there has been private money in the US since the Free Banking Era which lasted between 1837 and 1866, when almost anyone could issue paper money, backed by gold or silver. The only difference is that it is now virtual rather than physical.
Cryptocurrencies depend on trust – you have to trust both the technology that it is built on AND the people who designed, built, and run it.
There are two key types of cryptocurrencies – those that are native to a particular blockchain like Bitcoin and Ethereum, and those that are built on top of those blockchains like Tether and Dogecoin. They are known as layer 1 and layer 2 respectively. A key feature of a blockchain is that it is decentralized, in other words, there is no entity that can unilaterally make technical changes to the blockchain such as discarding transactions or minting new tokens.
Many cryptocurrencies are managed by the token holders through a voting mechanism, that empowers the organization “subcontracted” by the token holders to make technical changes. Often the voting rights of a token are separated from the economic ownership of the underlying token, so voting rights might be “earned” by locking up the underlying token for a period of time.
Many newly created cryptocurrency entities have a deal with a “market maker” to smooth out and manage the increase in value of the token over time. Sometimes these market makers manipulate the token value to boost its value, wash trading (trading between partners to give the impression of liquidity) is not uncommon.
Decentralization
The absolute core concept of crypto currencies is that the underlying blockchain on which they operate is decentralized.
A truly decentralized blockchain is one where control is so defused and distributed that no one entity can get control of 51% the blockchain nodes that jointly manage the blockchain through a consensus mechanism.
If this is achieved then effectively the blockchain cannot be stopped – no government can force anyone to hand over control to them, and so the blockchain is effectively regulation proof. Equally no entity can take control and profit from that control.
That is simple in theory but hard to achieve because all blockchains have a human creator and need to be promoted to the point where they grow organically and the creators can claim that they no longer have any control.
Bitcoin intentionally, or unintentionally, achieved this by being created by an anonymous founder who has never revealed themselves. This meant that no legal action could be taken against Bitcoin, so regulators could not stop it.
Replicating this is hard because someone needs to pay to create the underlying software and promote the blockchain so the obvious funding mechanism is to mint tokens on the blockchain when it is centralized, sell the vision and the tokens, and then hope that the blockchain grows to the point where the original creator can claim that they have no control but a stack of the tokens. One way of ensuring this occurs is to work with ‘Crypto Whales” – organizations with enough resources to prop up the token price when there is a price decline and hence create the impression of solid demand.
Most blockchains allow changes to be made through a voting mechanism based on ownership of the relevant token. This set up tension with the SEC in the US, and debates as to whether blockchains really were decentralized or not, and, therefore, who was liable for any potential breaches of securities laws. It is difficult to regulate decentralized blockchains, so you cannot rely on the SEC, which has anyway recently reduced its regulatory oversight of crypto. It is also difficult to sue an entity that is decentralized. The risk is that if a blockchain is not really decentralized, then one party could change the rules outside of the consensus mechanism. Boards need to understand which blockchains are being used and have a healthy degree of skepticism about new or less well known blockchains which may be untested. This is analogous to asking which banks your company is using.
Governance and Economic Interest Comparison: Joint Stock Companies vs Blockchains
1. Definitions
Cryptocurrency: A digital asset secured by cryptography for use as a medium of exchange. • Stablecoins: Crypto assets pegged to fiat currencies (e.g., USD) to ensure price stability.
Tokens: Programmable assets on blockchains that can represent ownership, access, or value.
CBDCs: Digital fiat currencies issued by central banks (e.g., China’s e-CNY).
DeFi: Decentralized financial systems operating without central intermediaries.
Meme Coins: Highly speculative cryptocurrencies often created as internet jokes or cultural references, such as Dogecoin or Shiba Inu. They may experience extreme volatility and are driven largely by community enthusiasm or viral trends.
NFTs (Non-Fungible Tokens): Unique digital assets representing ownership of specific items such as art, music, videos, or virtual goods, typically built on Ethereum or similar platforms. They are used in collectibles, digital art, and verifying authenticity.
2. How Blockchain Works
Blockchain is a distributed ledger technology that records transactions in a decentralized and immutable manner. Each transaction is grouped into a "block" and linked chronologically with previous blocks, forming a "chain." Every participant in the network (a node) maintains a copy of the ledger, which is updated through consensus algorithms.
Two primary consensus mechanisms are:
Proof of Work (PoW): Used by Bitcoin, this method requires network participants (miners) to solve complex mathematical problems to validate transactions and create new blocks. It is secure but energy-intensive.
Proof of Stake (PoS): Used by Ethereum, this system selects validators based on the number of coins they hold and are willing to "stake" or lock up as collateral. It is far more energy-efficient than PoW.
3. Types of Cryptocurrencies
Bitcoin (BTC): The first and most well-known cryptocurrency, primarily used as a store of value.
Ethereum (ETH): Supports smart contracts and decentralized applications; now uses Proof of Stake.
Solana (SOL), Cardano (ADA), and Polkadot (DOT): Compete with Ethereum for decentralized app development.
USDC, USDT: Examples of stablecoins pegged to the U.S. dollar.
4. Evolving Regulation
The SEC clarified that properly structured stablecoins are not securities.
MiCA in the EU created a comprehensive regulatory regime for crypto assets.
U.S. bills like the STABLE Act and GENIUS Act aim to create federal oversight of stablecoins.
The SEC’s Crypto Task Force considers regulatory relief for compliant token issuers.
IV. Strategic and Operational Implications for Boards
1. Strategic Opportunities
Capital Raising: Token issuance offers an alternative to traditional fundraising.
Treasury and Payments: Use of stablecoins can reduce FX costs and increase speed.
Smart Contracts: Automation of supply chain, insurance, and FX hedging.
Marketing and Loyalty: Tradeable tokens or NFTs can build customer engagement.
M&A and Competition: Crypto-funded competitors or token-based acquisitions may challenge traditional approaches.
2. Risk Management
Custody and Cybersecurity: Loss of private keys means loss of assets. Require secure custody, multi-signature wallets, and insurance.
On/Off-Ramps: Directors must oversee the due diligence process on exchanges and service providers.
Market Volatility: Crypto values can fluctuate rapidly, affecting balance sheets and P&L.
Reputation Risk: Association with unregulated assets or speculative tokens can damage brand trust.
Environmental Impact: Proof of Work mining consumes significant energy and has drawn criticism for its environmental footprint. Boards should consider environmental, social, and governance (ESG) implications when evaluating crypto exposure, especially in industries with sustainability goals.
Insurance: Implications for D&O pricing and availability, financial crime insurance
3. Legal and Compliance Considerations
Token Classification: Understand whether tokens qualify as securities under Howey and Reves tests.
Disclosure: Even if not securities, crypto activities may require disclosure.
Jurisdiction: Compliance requirements vary significantly across regions.
Governance Models: Tokens may have governance rights (e.g., DAO-style voting).
V. Oversight Questions for the Board
1. Strategic Fit
How does crypto align with our business goals?
What specific use cases are we pursuing?
2. Risk Framework
Who controls our private keys and how are they secured?
Which currencies and blockchains are we using and do we understand the differences?
Are our processes and controls adequate for managing crypto?
Do we have sufficient in house or external expertise?
Do we have insurance coverage for asset loss or cyber breaches?
3. Regulatory and Legal
Are our activities fully compliant in all jurisdictions?
What legal opinion or regulatory advice have we sought?
4. Financial Implications
How are crypto assets reported in our financials?
Are there implications for tax, audit, or investor relations?
5. Stakeholder Communication
How are we informing shareholders and customers?
Are we transparent about risks and innovations?
VI. Final Thoughts
Crypto has matured from a niche experiment into a foundational layer of modern finance and digital commerce. While not all companies need to participate, every board should understand the landscape, question management assumptions, and ensure robust oversight. The risks are real, but so are the opportunities. With clear strategy and governance, companies can leverage crypto technologies to gain competitive advantage and drive innovation
Key Takeaways for Directors:
Stay informed and invest in crypto literacy.
Embed crypto strategy into enterprise risk management.
Maintain transparent communication with stakeholders.
Balance innovation with responsibility and compliance.
This primer is intended to support board-level understanding and oversight. It is not legal or investment advice. Boards should consult experts as needed to evaluate crypto-related initiatives.