Are Manual Recs Making You a Dinosaur in the Digital Age?

There’s been a lot of conversations that I’ve been involved in recently that point to something of a tipping point for automation of reconciliation processes in securities operations. Yes, we have been discussing the need to move from manual to automatic for years but there’s one significant motivator now for FIs to finally bite the bullet —cryptocurrencies and DeFi.

While it is early days in the Trump administration, there have been radical shifts in policy pertaining to traditional regulatory bodies such as the SEC and CFTC, and more. Trump and Musk have been vocally pro-crypto, to the extent that the Department of Government Efficiency (D.O.G.E) was named after a Shiba Inu meme and well known cryptocurrency — Dogecoin. This government gets crypto.

There has also been a rather notable growth in the demand for crypto products in recent years offered by traditional brokers, with the launch of Bitcoin-based ETFs in January 2024 opening up the crypto market to a wider range of investors that would be more risk averse in purchasing crypto directly. A recent article highlighted that BlackRock’s iShares Bitcoin Trust (IBIT) has seen tremendous growth, with assets at over $52 billion as of January 9^th 2025. The success of Bitcoin ETFs is paving the way for a plethora of other cryptocurrencies to become ETFs, including XRP, Solana, and Litecoin.

Finally, there’s a demographic shift at hand, requiring FIs to focus on skating to where the puck is going and traditional finance (TradFi) needs to get on board with the changes that are happening in the market or risk obsolescence. In a recent FTF webinar, Jason Ekberg of Oliver Wyman noted that: “47 percent of Gen Y owns crypto and is more likely to own crypto than real estate. That’s anathema to the leadership of many TradFi institutions…”

This trifecta of reasons for being crypto ready may also be the reason you need to consider automation of your reconciliation processes if you want to still have skin in the game. At the core of this is the need to be able to meet the demands of cryptocurrencies and their specific requirements for long strings of numbers being recorded.

Let’s unpack this a little…

Traditional money typically has two decimal places – like $10.85 or £3.50. This is easy for humans to work with manually. We’re used to counting cents and pennies. But cryptocurrencies often use 18 decimal places. So instead of dealing with numbers like 10.85, you’re dealing with numbers like 10.123456789012345678.

This creates several practical problems for manual reconciliation:

• Visual verification becomes extremely difficult. Just trying to compare two 18-decimal numbers for equality by eye is prone to error. Did you notice if the 15^th decimal place was a 3 or an 8?
• Excel and many accounting tools round numbers or don’t display all decimals by default, which can hide discrepancies. A difference in the 18^th decimal place might not even be visible.
• Even tiny rounding errors or truncation at any step can create real discrepancies. If you’re handling thousands of transactions, these microscopic differences can add up to material amounts.

This is why automated reconciliation tools that can handle the full precision programmatically are typically necessary for cryptocurrency accounting.

As Jack Niven, vice president, North America of AutoRek mentioned on a recent FTF podcast: “18 decimals is a lot, but you have to tie out to the penny in financial services. That was actually a major problem when a lot of firms with Ethereum wanted to just drive automation, and a lot of the systems, legacy systems, couldn’t handle it.”

There have already been examples of where manual systems have caused significant issues with today’s very complex digital currencies. One example of how badly wrong the combination of cryptocurrencies and manual reconciliation was the implosion of the Celsius Network[1]. During bankruptcy proceedings, it was revealed that manual reconciliation errors were part of a larger set of accounting problems including –

• Asset-Liability Mismatch: Celsius allegedly had difficulties accurately tracking the precise amounts owed to customers versus what they actually held. This was allegedly complicated by their yield-generating activities where crypto assets were deployed across multiple platforms and protocols.
• Manual Tracking Problems: The company relied heavily on manual spreadsheets to track complex cryptocurrency positions. With the 18-decimal place precision of many cryptocurrencies, this manual tracking became extremely error-prone.
• Multiple Asset Types: They were dealing with multiple types of cryptocurrencies simultaneously, each with their own decimal place precision, making reconciliation even more complex. ETH has 18 decimal places, while Bitcoin has 8, and some tokens have different precisions altogether.
• Interest Calculation Issues: The precision problem was particularly acute when calculating interest payments, as small rounding errors or truncation issues could compound over time.

In conclusion – yes you may well be able to limp on with manual reconciliation processes for a few years. But the writing is on the wall for your obsolescence if you can’t transform your core reconciliation processes to be able to deal with the incoming wave of both cryptocurrencies and Web3 initiatives build on these tokens. It’s probably time to invest in your future rather than being anchored to the past.

Hear more on identifying the biggest operational roadblocks in asset management—and how to overcome them from Jack Niven and Jon Scappaticci of AutoRek on the latest episode of the FTF Exchange Podcast!  –>Give it a listen here

[1] https://www.nysb.uscourts.gov/sites/default/files/opinions/312902_3074_opinion.pdf