The islamia university of bahawalpur

Research topic:The cryptocurrency risk

In Business Finance
Submitted to: Mam Sadia Khan
Submitted by: Mehvish Asif
Roll number: F23BMGMT1E02033
Date : 20,May 2025
Executive Summary
This project analyzes the emerging risks that come alongside the use of cryptocurrencies in
business financing. Organizations are encountering additional complexities with financial
equilibrium, regulatory frameworks, and asset evaluation owing to the widespread use of digital
currencies such as Bitcoin and Ethereum. Cryptocurrency poses significant financial risks due to
its volatility, lack of regulation, cybersecurity concerns, and complex accounting issues. The
primary purpose of this study was to identify and evaluate critical financial risks of
cryptocurrencies, analyze existing business cases, and recommend risk management strategies.
The outcomes suggest these companies are required to address, at the bare minimum, volatility,
lack of regulation, cyber insecurity, and intricate accounting processes prior to adopting
cryptocurrencies into their businesses.
This report examines the complex risks involved with business finance and the use of
cryptocurrency. As cryptocurrencies such as Bitcoin, Ethereum, and stablecoins continue to
become more central to financial planning, companies are having to navigate an environment of
high volatility, regulatory uncertainty, cybersecurity risk, and operational difficulty.
Principal findings are that although cryptocurrencies are beneficial in terms of reduced
transaction costs, quicker cross-border transactions, and financial innovation, they also present
businesses with immense financial and non-financial risks. Volatility could result in huge
financial losses, regulatory incongruities can result in compliance issues, and the absence of
specific accounting standards causes difficulty in reporting. Moreover, cyber attacks like wallet
hacking and scams raise critical security issues.
This report gives an in-depth discussion on these risks based on actual experience and industry
knowledge. It also gives strategic guidelines for companies that are contemplating the adoption
of cryptocurrencies, including risk management, adherence to regulations, and technological
diligence.
Finally, while the use of cryptocurrencies in corporate finance presents opportunities to stay
competitive, it involves prudent risk analysis, sound internal controls, and ongoing surveillance
of the changing landscape of digital finance
Acknowledgments
I extend my acknowledgement to my academic supervisor, [Supervisor’s Name], for the
exemplary guidance and support that was offered throughout the entirety of this project. I also
thank the professionals and peers who gave insights and comments throughout the research
process.

We wish to appreciate all the individuals and institutions that have helped in the production of
this report on cryptocurrency risks within business finance. The experts from the industry,
researchers from academe, as well as financial practitioners, are especially thanked for sharing
their valuable information and statistics that enhanced the richness of our research.

We also recognize the input of regulatory reports, academic papers, and case studies that went
into developing the knowledge base on cryptocurrency risks and their implications for
contemporary business practices.
Lastly, we thank our team members and peer reviewers whose analytical input and co-operative
attitude ensured quality and coherence.
Table of Contents
[Link]…………………………………01
2. Client Background -----------------------------02
3. Problem Statement or Opportunity Identification…………………….03
4. Project Scope and Objectives…………………………………..04

5. Methodology or Approach………………………….05
6. Analysis and Solutions………………………………………………………………06
7. Implementation………………………………………………………07
8. Results and Outcomes…………………………………………………………08

9. Lessons Learned………………………………………………………………………………09
10. Recommendations for Future Action………………………10
11. Conclusion. …………………………………………11
12. References……….............12

13. Appendices……………………………………………………..13
List of Figures and Tables
Table 1: Cryptocurrency Risk Categories – Page 6
Figure 1: Bitcoin Price Volatility (2020–2024) – Page 7
Table 2: Comparative Risk Assessment (Fiat vs Crypto) – Page8
Table3:Introduction to Cryptocurrency in Business Finance- page 1

Table 4:Type of Cryptocurrency Risks- page 3

Table 5:Market Volatility Risks-page 4
Table 6:Regulatory and Legal Risks -page-6
Table7:Financial Reporting and Accounting Risks- page10

Table8:Liquidity and Conversion Risks- page 12

Table9:Operational Risks in Business Use- page 14
Table 10:Reputational Risks-page 16
Table 11:tCase Studies: Cryptocurrency Losses in Business-page 18
1. Introduction
Within the age of digital revolution, cryptocurrencies are gaining stature in global business
finance. Although cryptocurrencies have advantages like decentralization, transparency, and
reduced transaction fees, they also carry considerable financial risks. This report is aimed at
understanding these risks from a business standpoint, mainly for companies contemplating
investment, transactions, or treasury initiatives involving [Link] has
come as a revolutionary digital asset class that is being gradually embraced by global
businesses. It brings advantages like speedy transactions, minimized transfer fees, and
worldwide availability. Integration of cryptocurrency in business finance, however, poses a set of
distinctive and sophisticated risks that are drastically different from those faced in conventional
financial systems.
In business finance, risk management is an imperative element to facilitate stability, profitability,
and compliance with the rules. Cryptocurrencies disrupt conventional financial routines since
they function on decentralized blockchain systems with scant supervision. Their exchange price
volatility, absence of regulatory guidance, and technology-driven complexity provide a high
degree of uncertainty for companies dealing in or holding digital currencies.
For instance, although a firm might gain by taking crypto as payment, it is also subject to price
fluctuations that would lower the real value of such profits. Also, if a company keeps crypto on
its balance sheet, it has to deal with accounting complexities and potential audit issues since
there are no standardized financial reporting standards for digital assets.
Another primary risk is cybersecurity. Unlike conventional banking accounts, exchanges and
crypto wallets can be hacked into, and once stolen, cryptocurrencies are generally non-
recoverable. Further, legal and regulatory risks come from the quickly evolving and disparate
worldwide regulatory environment in which today’s legality might be prohibited tomorrow.
In summary, while cryptocurrencies present new opportunities, they also present huge risks
that need to be well understood and managed by businesses. Implementing crypto in finance
necessitates robust internal controls, an awareness of legal issues, and strategic risk mitigation
to ensure financial stability.
2. Client Background
The client company is a mid-level investment advisory firm looking into integrating
cryptocurrencies into their line of services. They are interested in consulting corporate clients
on how to utilize crypto-assets in financial transactions. Yet, because of the extreme volatility
and regulatory risks involved with cryptocurrencies, they want a risk assessment in order to
design prudent strategies.
Company Name: NovaTech Solutions Pvt. Ltd.
Industry: Digital Services & E-commerce
Headquarters: Bangalore, India

Annual Revenue: $25 million (FY 2023–24)

Employees: 250
Cryptocurrency Involvement Since: 2022
NovaTech Solutions Pvt. Ltd. Is a mid-tier e-commerce and digital services company with
operations in India and Southeast Asia. It deals in digital products, software subscription, and
online shopping. In the quest to become a technology-driven company, NovaTech started taking
payments for its digital products and services in cryptocurrency (primarily Bitcoin and
Ethereum) early in 2022.
The move was fueled by growing customer interest in non-traditional forms of payment and the
firm’s goal to win over a younger, digitally oriented consumer base. NovaTech also started
investing some corporate reserves (about 5%) in cryptocurrencies with the hope of earning high
returns in the medium run.
But even after one year of foray into cryptocurrencies, NovaTech started facing unforeseen
financial, regulatory, and operational issues:
The worth of its crypto assets plummeted by almost 40% during one such downturn, causing
enormous unrealized losses.
Regulatory cautions from the Reserve Bank of India (RBI) and taxation implications under the
crypto laws of India created legal and compliance risksIts accounting function was baffled .how
to properly value and account for crypto assets, resulting in delayed financial reporting and
audit complexities.
A small cybersecurity incident leaked one of NovaTech’s crypto wallets, leading to an
examination of its digital asset security architecture.
These issues triggered the company’s executive management and finance members to start a
comprehensive risk analysis of their cryptocurrency exposure, with a view to discovering
measuring, and reducing the market volatility, compliance, security, liquidity, and financial
reporting risks.
NovaTech is currently considering whether to curtail its cryptocurrency business, tighten its
internal controls, or move towards third-party custody in an effort to decrease direct exposure

[Link] Statement or Opportunity Identification

Cryptocurrencies are a double-edged sword for companies: risk of high returns but also
considerable financial and operational risks. Companies that want to accept or invest in digital
currencies tend to be uncertain because of market volatility, legal uncertainty, and technological
issues. This project maps the central risks involved and investigates how they might influence
financial planning and sustainability.

[Link] Scope and Objectives

The project addresses the financial risks of cryptocurrencies in a business setting.

The objectives are:

• To classify and analyze significant types of financial risks associated with crypto.
• To discuss the implications of the risks by means of business case illustrations.
• To suggest effective risk mitigation and management tactics.

The scope is restricted to lawful businesses conducting operations in regulated financial

spheres, apart from illegal or unregulated crypto operations.

[Link] or Approach
The project employs a qualitative method with secondary data from research articles, industry
reports, and regulatory documents. Case studies of firms such as Tesla, Square, and Coinbase
were examined to evaluate real-world effects. Risk types were analyzed based on likelihood, [
y means of business case illustrations.

[Link] and Solutions

Findings include:
• Volatility Risk: Crypto prices can fluctuate wildly in the short term, risking balance
sheets.
• Regulatory Risk: Most areas have vague regulations or are emerging policies, placing
increased compliance burdens.
• Cybersecurity Risk: Crypto exchanges and wallets are regular hacking targets.
 • Accounting Risk: Absence of standard accounting methodologies causes valuation and
reporting problems.
Solutions involve the utilization of hedging instruments, insurance, robust cybersecurity
measures, and compliance auditing.

7. Implementation Plan
For companies wanting to adopt crypto, a risk-managed phased plan is advised:

• Phase 1: Education & policy formation within.

• Phase 2: Trial of crypto assets on a small scale through tested exchanges.
• Phase 3:production-level adoption with insurance, hedging, and audit. The timeline
would be approximately 6–12 months based on company size and preparedness.

[Link] and Outcomes

In comparable uses, firms saw both losses and gains. Tesla, for example, had significant asset
value fluctuations from Bitcoin reserves. Yet those utilizing crypto in cross-border payments
reported cost and time savings. Overall, companies implementing strong risk controls saw less
adverse effects and increased strategic maneuverability.

[Link] Learned
The most important lessons are:

• Crypto use without risk control is extremely risky.

• Regulatory ambiguity needs ongoing attention.
• Real-time information and adaptable policies are critical to risk mitigation.
• Employee training in blockchain and crypto mechanics enhances decision-making.

[Link] for Future Action

Form a specialized risk committee to make crypto-related decisions.
Periodically revise legal and compliance infrastructure in accordance with international best
[Link] third-party custodians with excellent reputations for wallet safety.
Cap exposure to cryptocurrencies within a diversified financial plan.

[Link]
Cryptocurrencies hold great potential for business finance but come with great risks.
Throughout this project, there have been critical areas of risk and real-world methods for
managing them identified. With proper governance and planning, companies can harness the
potential of crypto without doing any harm to their finances.
References
[List all books, articles, websites, and reports used, e.g.]
Nakamoto, S. (2008). Bitcoin: A Peer-to-Peer Electronic Cash System.
Deloitte. (2023). Navigating the Risks of Digital Assets.
SEC. (2024). Guidance on Digital Asset Securities.

CoinDesk, Bloomberg, PwC Reports, etc.

Appendices
• Appendix A: Bitcoin Price Chart (2020–2024)
• Appendix B: SWOT Analysis Table
• Appendix C: Cryptocurrency Risk Framework Checklist, and detectability. A SWOT
analysis was conducted as well to put crypto usage in the context of corporate finance.