Finance
West Fargo hires California man as new finance director
![West Fargo hires California man as new finance director West Fargo hires California man as new finance director](https://cdn.forumcomm.com/dims4/default/c3c181b/2147483647/strip/true/crop/5472x3648+0+0/resize/1599x1066!/quality/90/?url=https%3A%2F%2Fforum-communications-production-web.s3.us-west-2.amazonaws.com%2Fbrightspot%2F5f%2F52%2F676834034a5a990f069b497d0c58%2F111622.N.WF.Logo.06.jpg)
WEST FARGO — Willy Galindo, from California, has been named the city of West Fargo’s new finance director.
Galindo has served as a senior financial analyst with the city of Palmdale, Calif., since 2017. Prior to that, he worked in various finance and accounting roles for Princess Cruise Lines from 2007-2017.
Palmdale is a city with a population of more than 165,000. While there, Galindo was directly involved in the preparation and management of a $512 million budget. He also worked on financial reporting, audits, debt service, and the implementation of new financial software. Galindo holds a Bachelor of Arts in Business Economics from the University of California, Santa Barbara.
“I am honored to be joining the city of West Fargo and am excited to be taking on the leadership role of finance director,” said Galindo in a statement issued by the city. “I was drawn to the growth of the area and hope to use my years of experience in city government finance as the city continues to grow into the future.”
The city has been searching for a new finance director since Heidi Delorme resigned in February.
She was hired in May 2023.
West Fargo interviewed three candidates in April after receiving about 20 applications. Two of the interviewees were from outside the region, City Administrator Dustin Scott said.
Following those interviews, the city decided to post the director position a second time as few applicants had prior city government experience.
The finance director is responsible for the management of accounting, debt/treasury, utility billing, budgeting, accounts payable/receivable, payroll and investments. Former finance directors have been paid between $123,600 and $140,000.
Galindo will begin in late September.
Wendy Reuer covers all things West Fargo for The Forum.
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Finance
Palo Alto Networks Reports Fiscal Fourth Quarter and Fiscal Year 2024 Financial Results
![Palo Alto Networks Reports Fiscal Fourth Quarter and Fiscal Year 2024 Financial Results Palo Alto Networks Reports Fiscal Fourth Quarter and Fiscal Year 2024 Financial Results](https://mma.prnewswire.com/media/325503/palo_alto_networks_logo_2015.jpg?p=facebook)
- Fiscal fourth quarter revenue grew 12% year over year to $2.2 billion. Fiscal year 2024 revenue grew 16% year over year to $8.0 billion.
- Next-Generation Security ARR grew 43% year over year to $4.2 billion.
- Remaining performance obligation grew 20% year over year to $12.7 billion.
SANTA CLARA, Calif., Aug. 19, 2024 /PRNewswire/ — Palo Alto Networks (NASDAQ: PANW), the global cybersecurity leader, announced today financial results for its fiscal fourth quarter and fiscal year ended July 31, 2024.
Total revenue for the fiscal fourth quarter 2024 grew 12% year over year to $2.2 billion, compared with total revenue of $2.0 billion for the fiscal fourth quarter 2023. GAAP net income for the fiscal fourth quarter 2024 was $357.7 million, or $1.01 per diluted share, compared with GAAP net income of $227.7 million, or $0.64 per diluted share, for the fiscal fourth quarter 2023.
Non-GAAP net income for the fiscal fourth quarter 2024 was $522.2 million, or $1.51 per diluted share, compared with non-GAAP net income of $482.5 million, or $1.44 per diluted share, for the fiscal fourth quarter 2023. A reconciliation between GAAP and non-GAAP information is contained in the tables below.
“We finished off the year with strong execution on our platformization strategy in Q4,” said Nikesh Arora, chairman and CEO of Palo Alto Networks. “As we look forward to fiscal year 2025 and beyond, we are focused on scaling our Next-Generation Security business through continued innovation and execution.”
“Our top-line strength showed through in our remaining performance obligation and Next-Generation Security ARR,” said Dipak Golechha, chief financial officer of Palo Alto Networks. “At the same time we successfully balanced profitable growth, as our non-GAAP operating margins increased by more than 300 basis points for the year with strong cash generation, marking one of the best years for Palo Alto Networks.”
Financial Outlook
Palo Alto Networks provides guidance based on current market conditions and expectations.
For the fiscal first quarter 2025, we expect:
- Total revenue in the range of $2.10 billion to $2.13 billion, representing year-over-year growth of between 12% and 13%.
- Diluted non-GAAP net income per share in the range of $1.47 to $1.49, representing year-over-year growth of between 7% and 8%.
For the fiscal year 2025, we expect:
- Total revenue in the range of $9.10 billion to $9.15 billion, representing year-over-year growth of between 13% and 14%.
- Non-GAAP operating margin in the range of 27.5% to 28.0%.
- Diluted non-GAAP net income per share in the range of $6.18 to $6.31, representing year-over-year growth of between 9% and 11%.
- Adjusted free cash flow margin in the range of 37% to 38%.
The board of directors authorized an additional $500 million for share repurchases, increasing the remaining authorization for future share repurchases to $1 billion, expiring December 31, 2025.
Guidance takes into account the expected financial impact of the pending acquisition of IBM’s QRadar SaaS assets. Guidance for non-GAAP financial measures excludes share-based compensation-related charges, including share-based payroll tax expense, acquisition-related costs, amortization expense of acquired intangible assets, litigation-related charges, including legal settlements, restructuring and other costs, non-cash charges related to convertible notes, foreign currency gains (losses), and income tax and other tax adjustments related to our long-term non-GAAP effective tax rate, along with certain non-recurring expenses and certain non-recurring cash flows. We have not reconciled non-GAAP operating margin guidance to GAAP operating margin, diluted non-GAAP net income per share guidance to GAAP net income per diluted share or adjusted free cash flow margin guidance to GAAP net cash from operating activities because we do not provide guidance on GAAP operating margin, GAAP net income or net cash from operating activities and would not be able to present the various reconciling cash and non-cash items between GAAP and non-GAAP financial measures because certain items that impact these measures are uncertain or out of our control, or cannot be reasonably predicted, including share-based compensation expense, without unreasonable effort. The actual amounts of such reconciling items will have a significant impact on the company’s GAAP net income per diluted share and GAAP net cash from operating activities.
Earnings Call Information
Palo Alto Networks will host a video webcast for analysts and investors to discuss the company’s fiscal fourth quarter and fiscal year 2024 results as well as the outlook for its fiscal first quarter and fiscal year 2025 today at 4:30 p.m. Eastern time/1:30 p.m. Pacific time. Open to the public, investors may access the webcast, supplemental financial information and earnings slides from the “Investors” section of the company’s website at investors.paloaltonetworks.com. A replay will be available three hours after the conclusion of the webcast and archived for one year.
Forward-Looking Statements
This press release contains forward-looking statements that involve risks, uncertainties, and assumptions including statements regarding our platformization strategy and financial outlook for the fiscal first quarter 2025 and fiscal year 2025. In addition, the financial outlook for the fiscal first quarter 2025 and fiscal year 2025 assumes consummation of the pending acquisition of IBM’s QRadar SaaS assets during the fiscal first quarter of 2025, and reflects revenue contribution and ongoing expenses from such acquisition. There are a significant number of factors that could cause actual results to differ materially from forward-looking statements made in this press release, including: developments and changes in general market, political, economic, and business conditions; failure of our platformization product offerings; failure to achieve the expected benefits of our strategic partnerships and acquisitions; risks associated with managing our growth; risks associated with new product, subscription and support offerings, including our efforts to leverage AI; shifts in priorities or delays in the development or release of new offerings, or the failure to timely develop and achieve market acceptance of new products and subscriptions as well as existing product, subscription and support offerings; failure of our business strategies; rapidly evolving technological developments in the market for security products, subscriptions and support offerings; defects, errors, or vulnerabilities in our products, subscriptions or support offerings; our customers’ purchasing decisions and the length of sales cycles; our competition; our ability to attract and retain new customers; our ability to acquire and integrate other companies, products, or technologies in a successful manner; our debt repayment obligations; and our share repurchase program, which may not be fully consummated or enhance shareholder value, and any share repurchases which could affect the price of our common stock.
Additional risks and uncertainties that could affect our financial results are included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10-Q filed with the SEC on May 21, 2024, which is available on our website at investors.paloaltonetworks.com and on the SEC’s website at www.sec.gov. Additional information will also be set forth in other filings that we make with the SEC from time to time. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we do not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.
Non-GAAP Financial Measures and Other Key Metrics
Palo Alto Networks has provided in this press release financial information that has not been prepared in accordance with generally accepted accounting principles in the United States (GAAP). The company uses these non-GAAP financial measures and other key metrics internally in analyzing its financial results and believes that the use of these non-GAAP financial measures and key metrics are helpful to investors as an additional tool to evaluate ongoing operating results and trends, and in comparing the company’s financial results with other companies in its industry, many of which present similar non-GAAP financial measures or key metrics.
The presentation of these non-GAAP financial measures and key metrics are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures and should be read only in conjunction with the company’s consolidated financial statements prepared in accordance with GAAP. A reconciliation of the company’s historical non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included in this press release, and investors are encouraged to review these reconciliations.
Non-GAAP operating margin. Palo Alto Networks defines non-GAAP operating margin as non-GAAP operating income divided by total revenue. The company defines non-GAAP operating income as operating income plus share-based compensation-related charges, including share-based payroll tax expense, acquisition-related costs, amortization expense of acquired intangible assets, litigation-related charges, including legal settlements, and restructuring and other costs. The company believes that non-GAAP operating margin provides management and investors with greater visibility into the underlying performance of the company’s core business operating results.
Non-GAAP net income and net income per share, diluted. Palo Alto Networks defines non-GAAP net income as net income plus share-based compensation-related charges, including share-based payroll tax expense, acquisition-related costs, amortization expense of acquired intangible assets, litigation-related charges, including legal settlements, restructuring and other costs, and non-cash charges related to convertible notes. The company also excludes from non-GAAP net income foreign currency gains (losses) and tax adjustments related to our long-term non-GAAP effective tax rate in order to provide a complete picture of the company’s recurring core business operating results. The company defines non-GAAP net income per share, diluted, as non-GAAP net income divided by the weighted-average diluted shares outstanding, which includes the potentially dilutive effect of the company’s employee equity incentive plan awards and the company’s convertible senior notes outstanding and related warrants, after giving effect to the anti-dilutive impact of the company’s note hedge agreements, which reduces the potential economic dilution that otherwise would occur upon conversion of the company’s convertible senior notes. Under GAAP, the anti-dilutive impact of the note hedge is not reflected in diluted shares outstanding. The company considers these non-GAAP financial measures to be useful metrics for management and investors for the same reasons that it uses non-GAAP operating margin.
Next-Generation Security ARR. Palo Alto Networks defines Next-Generation Security ARR as the annualized allocated revenue of all active contracts as of the final day of the reporting period for Prisma and Cortex offerings inclusive of the VM-Series and related services, and certain cloud-delivered security services. The company considers Next-Generation Security ARR to be a useful metric for management and investors to evaluate the performance of the company because Next-Generation Security is where the company has focused its innovation and the company expects its overall revenue to be disproportionately driven by this Next-Generation Security portfolio. Because Next-Generation Security ARR does not have the effect of providing a numerical measure that is different from any comparable GAAP measure, the company does not consider it a non-GAAP measure.
Investors are cautioned that there are a number of limitations associated with the use of non-GAAP financial measures and key metrics as analytical tools. Many of the adjustments to the company’s GAAP financial measures reflect the exclusion of items that are recurring and will be reflected in the company’s financial results for the foreseeable future, such as share-based compensation, which is an important part of Palo Alto Networks employees’ compensation and impacts their performance. Furthermore, these non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP, and the components that Palo Alto Networks excludes in its calculation of non-GAAP financial measures may differ from the components that its peer companies exclude when they report their non-GAAP results of operations. Palo Alto Networks compensates for these limitations by providing specific information regarding the GAAP amounts excluded from these non-GAAP financial measures. In the future, the company may also exclude non-recurring expenses and other expenses that do not reflect the company’s core business operating results.
About Palo Alto Networks
Palo Alto Networks is the global cybersecurity leader, committed to making each day safer than the one before with industry-leading, AI-powered solutions in network security, cloud security and security operations. Powered by Precision AI, our technologies deliver precise threat detection and swift response, minimizing false positives and enhancing security effectiveness. Our platformization approach integrates diverse security solutions into a unified, scalable platform, streamlining management and providing operational efficiencies with comprehensive protection. From defending network perimeters to safeguarding cloud environments and ensuring rapid incident response, Palo Alto Networks empowers businesses to achieve Zero Trust security and confidently embrace digital transformation in an ever-evolving threat landscape. This unwavering commitment to security and innovation makes us the cybersecurity partner of choice.
At Palo Alto Networks, we’re committed to bringing together the very best people in service of our mission, so we’re also proud to be the cybersecurity workplace of choice, recognized among Newsweek’s Most Loved Workplaces (2021-2024), with a score of 100 on the Disability Equality Index (2024, 2023, 2022), and HRC Best Places for LGBTQ+ Equality (2022). For more information, visit www.paloaltonetworks.com.
Palo Alto Networks, the Palo Alto Networks logo, and Precision AI are trademarks of Palo Alto Networks, Inc. in the United States and in jurisdictions throughout the world. All other trademarks, trade names, or service marks used or mentioned herein belong to their respective owners. Any unreleased services or features (and any services or features not generally available to customers) referenced in this or other press releases or public statements are not currently available (or are not yet generally available to customers) and may not be delivered when expected or at all. Customers who purchase Palo Alto Networks applications should make their purchase decisions based on services and features currently generally available.
Palo Alto Networks, Inc. |
|||||||
Preliminary Condensed Consolidated Statements of Operations |
|||||||
(In millions, except per share data) |
|||||||
(Unaudited) |
|||||||
Three Months Ended |
Year Ended |
||||||
July 31, |
July 31, |
||||||
2024 |
2023 |
2024 |
2023 |
||||
Revenue: |
|||||||
Product |
$ 480.5 |
$ 507.4 |
$ 1,603.3 |
$ 1,578.4 |
|||
Subscription and support |
1,709.0 |
1,445.9 |
6,424.2 |
5,314.3 |
|||
Total revenue |
2,189.5 |
1,953.3 |
8,027.5 |
6,892.7 |
|||
Cost of revenue: |
|||||||
Product |
104.7 |
104.3 |
348.2 |
418.3 |
|||
Subscription and support |
469.0 |
402.5 |
1,711.0 |
1,491.4 |
|||
Total cost of revenue |
573.7 |
506.8 |
2,059.2 |
1,909.7 |
|||
Total gross profit |
1,615.8 |
1,446.5 |
5,968.3 |
4,983.0 |
|||
Operating expenses: |
|||||||
Research and development |
494.8 |
414.4 |
1,809.4 |
1,604.0 |
|||
Sales and marketing |
742.3 |
664.0 |
2,794.5 |
2,544.0 |
|||
General and administrative |
140.3 |
114.6 |
680.5 |
447.7 |
|||
Total operating expenses |
1,377.4 |
1,193.0 |
5,284.4 |
4,595.7 |
|||
Operating income |
238.4 |
253.5 |
683.9 |
387.3 |
|||
Interest expense |
(0.3) |
(5.7) |
(8.3) |
(27.2) |
|||
Other income, net |
80.9 |
68.7 |
312.7 |
206.2 |
|||
Income before income taxes |
319.0 |
316.5 |
988.3 |
566.3 |
|||
Provision for (benefit from) income taxes |
(38.7) |
88.8 |
(1,589.3) |
126.6 |
|||
Net income |
$ 357.7 |
$ 227.7 |
$ 2,577.6 |
$ 439.7 |
|||
Net income per share, basic |
$ 1.10 |
$ 0.74 |
$ 8.07 |
$ 1.45 |
|||
Net income per share, diluted |
$ 1.01 |
$ 0.64 |
$ 7.28 |
$ 1.28 |
|||
Weighted-average shares used to compute net income per share, basic |
324.4 |
306.9 |
319.2 |
303.2 |
|||
Weighted-average shares used to compute net income per share, diluted |
353.9 |
354.5 |
354.0 |
342.3 |
Palo Alto Networks, Inc. |
|||||||
Reconciliation of GAAP to Non-GAAP Financial Measures |
|||||||
(In millions, except per share amounts) |
|||||||
(Unaudited) |
|||||||
Three Months Ended |
Year Ended |
||||||
July 31, |
July 31, |
||||||
2024 |
2023 |
2024 |
2023 |
||||
GAAP operating income |
$ 238.4 |
$ 253.5 |
$ 683.9 |
$ 387.3 |
|||
Share-based compensation-related charges |
287.1 |
274.1 |
1,161.7 |
1,145.1 |
|||
Acquisition-related costs(1) |
3.5 |
— |
13.6 |
19.5 |
|||
Amortization expense of acquired intangible assets |
33.7 |
24.7 |
119.0 |
103.1 |
|||
Litigation-related charges(2) |
25.6 |
1.7 |
211.5 |
7.1 |
|||
Restructuring and other costs(3) |
— |
— |
— |
(2.2) |
|||
Non-GAAP operating income |
$ 588.3 |
$ 554.0 |
$ 2,189.7 |
$ 1,659.9 |
|||
Non-GAAP operating margin |
26.9 % |
28.4 % |
27.3 % |
24.1 % |
|||
GAAP net income |
$ 357.7 |
$ 227.7 |
$ 2,577.6 |
$ 439.7 |
|||
Share-based compensation-related charges |
287.1 |
274.1 |
1,161.7 |
1,145.1 |
|||
Acquisition-related costs(1) |
3.5 |
— |
13.6 |
19.5 |
|||
Amortization expense of acquired intangible assets |
33.7 |
24.7 |
119.0 |
103.1 |
|||
Litigation-related charges(2) |
25.6 |
1.7 |
211.5 |
7.1 |
|||
Restructuring and other costs(3) |
— |
— |
— |
(2.2) |
|||
Non-cash charges related to convertible notes(4) |
0.6 |
1.5 |
3.5 |
6.8 |
|||
Foreign currency loss associated with non-GAAP adjustments |
— |
— |
— |
0.5 |
|||
Income tax and other tax adjustments(5) |
(186.0) |
(47.2) |
(2,138.8) |
(279.6) |
|||
Non-GAAP net income |
$ 522.2 |
$ 482.5 |
$ 1,948.1 |
$ 1,440.0 |
|||
GAAP net income per share, diluted |
$ 1.01 |
$ 0.64 |
$ 7.28 |
$ 1.28 |
|||
Share-based compensation-related charges |
0.85 |
0.86 |
3.44 |
3.59 |
|||
Acquisition-related costs(1) |
0.01 |
0.00 |
0.04 |
0.06 |
|||
Amortization expense of acquired intangible assets |
0.10 |
0.07 |
0.34 |
0.30 |
|||
Litigation-related charges(2) |
0.07 |
0.00 |
0.60 |
0.02 |
|||
Restructuring and other costs(3) |
0.00 |
0.00 |
0.00 |
(0.01) |
|||
Non-cash charges related to convertible notes(4) |
0.00 |
0.00 |
0.01 |
0.02 |
|||
Foreign currency loss associated with non-GAAP adjustments |
0.00 |
0.00 |
0.00 |
0.00 |
|||
Income tax and other tax adjustments(5) |
(0.53) |
(0.13) |
(6.04) |
(0.82) |
|||
Non-GAAP net income per share, diluted |
$ 1.51 |
$ 1.44 |
$ 5.67 |
$ 4.44 |
|||
GAAP weighted-average shares used to compute net income per share, diluted |
353.9 |
354.5 |
354.0 |
342.3 |
|||
Weighted-average anti-dilutive impact of note hedge agreements |
(7.4) |
(19.3) |
(10.4) |
(17.9) |
|||
Non-GAAP weighted-average shares used to compute net income per share, diluted |
346.5 |
335.2 |
343.6 |
324.4 |
(1) |
Consists of acquisition transaction costs, share-based compensation related to the cash settlement of certain equity awards, and costs to terminate certain employment, operating lease, and other contracts of the acquired companies. |
(2) |
Consists of the amortization of intellectual property licenses and covenant not to sue. During the three months and fiscal year ended July 31, 2024, it also includes a legal contingency charge and a litigation settlement charge. |
(3) |
Consists of adjustments to restructuring and other costs. |
(4) |
Consists of non-cash interest expense for amortization of debt issuance costs related to the company’s convertible senior notes. |
(5) |
Consists of income tax adjustments related to our long-term non-GAAP effective tax rate. During fiscal year 2024, it included a tax benefit from a release of our valuation allowance on U.S. federal, U.S. states other than California, and United Kingdom deferred tax assets. During fiscal year 2023, it included tax benefits from releases of tax reserves related to uncertain tax positions resulting from tax settlements. |
Palo Alto Networks, Inc. |
|||
Preliminary Condensed Consolidated Balance Sheets |
|||
(In millions) |
|||
July 31, 2024 |
July 31, 2023 |
||
(unaudited) |
|||
Assets |
|||
Current assets: |
|||
Cash and cash equivalents |
$ 1,535.2 |
$ 1,135.3 |
|
Short-term investments |
1,043.6 |
1,254.7 |
|
Accounts receivable, net |
2,618.6 |
2,463.2 |
|
Short-term financing receivables, net |
725.9 |
388.8 |
|
Short-term deferred contract costs |
369.0 |
339.2 |
|
Prepaid expenses and other current assets |
557.4 |
466.8 |
|
Total current assets |
6,849.7 |
6,048.0 |
|
Property and equipment, net |
361.1 |
354.5 |
|
Operating lease right-of-use assets |
385.9 |
263.3 |
|
Long-term investments |
4,173.2 |
3,047.9 |
|
Long-term financing receivables, net |
1,182.1 |
653.3 |
|
Long-term deferred contract costs |
562.0 |
547.1 |
|
Goodwill |
3,350.1 |
2,926.8 |
|
Intangible assets, net |
374.9 |
315.4 |
|
Deferred tax assets |
2,399.0 |
23.1 |
|
Other assets |
352.9 |
321.7 |
|
Total assets |
$ 19,990.9 |
$ 14,501.1 |
|
Liabilities and stockholders’ equity |
|||
Current liabilities: |
|||
Accounts payable |
$ 116.3 |
$ 132.3 |
|
Accrued compensation |
554.7 |
548.3 |
|
Accrued and other liabilities |
506.7 |
390.8 |
|
Deferred revenue |
5,541.1 |
4,674.6 |
|
Convertible senior notes, net |
963.9 |
1,991.5 |
|
Total current liabilities |
7,682.7 |
7,737.5 |
|
Long-term deferred revenue |
5,939.4 |
4,621.8 |
|
Deferred tax liabilities |
387.7 |
28.1 |
|
Long-term operating lease liabilities |
380.5 |
279.2 |
|
Other long-term liabilities |
430.9 |
86.1 |
|
Total liabilities |
14,821.2 |
12,752.7 |
|
Stockholders’ equity: |
|||
Preferred stock |
— |
— |
|
Common stock and additional paid-in capital |
3,821.1 |
3,019.0 |
|
Accumulated other comprehensive loss |
(1.6) |
(43.2) |
|
Retained earnings (accumulated deficit) |
1,350.2 |
(1,227.4) |
|
Total stockholders’ equity |
5,169.7 |
1,748.4 |
|
Total liabilities and stockholders’ equity |
$ 19,990.9 |
$ 14,501.1 |
SOURCE Palo Alto Networks, Inc.
Finance
To Boost Crypto, Break The Federal Grip On Americans’ Financial Rights
![To Boost Crypto, Break The Federal Grip On Americans’ Financial Rights To Boost Crypto, Break The Federal Grip On Americans’ Financial Rights](https://imageio.forbes.com/specials-images/imageserve/66bfb289b0fbebc443b1517d/0x0.jpg?format=jpg&height=900&width=1600&fit=bounds)
Senator Patrick Toomey (R-PA) listens while Senator Cynthia Lummis (R-WY) speaks during a press … [+]
Despite the efforts of a few members of Congress, U.S. cryptocurrency policy remains a mess. For years, the Securities and Exchange Commission, most federal banking agencies, and many members of Congress have been outright hostile toward crypto.
But due to several new proposals, many crypto supporters are hopeful this hostility will fade. Over the last few weeks, Sen. Cynthia Lummis (R-WY), former President Donald Trump, and presidential candidate Robert F. Kennedy Jr., all announced proposals for the U.S. to create a bitcoin reserve.
Given the sad current state of U.S. crypto policy, however, it is doubtful these kinds of proposals would get things on track. Still, they provide a great opportunity to have a more fundamental conversation about how to improve crypto policy. To paraphrase my colleague George Selgin, there’s surely a good policy somewhere between the status quo and these reserve proposals.
And it’s vital that Congress finds it.
Crypto enables new forms of digital payments, where users can bypass traditional third-party intermediaries, such as banks and broker-dealers. In other words, it allows for person-to-person electronic transfers of digital assets, including money.
In theory, allowing people to spend money electronically in ways resembling how they’ve been spending cash shouldn’t be controversial, especially in America. Nonetheless, this feature, along with the potentially disruptive nature of crypto, has proven too much for politicians to overcome.
Some people don’t like that crypto is a competitive threat to companies in the traditional payments industry. Others don’t like that it’s a threat to the existing anti-money laundering regime. (That’s an especially big problem because the federal government has drafted traditional financial institutions to act as an extension of law enforcement.) Other critics see bypassing these systems as a threat to the U.S. dollar itself.
The specter of these threats has made it difficult to develop sound cryptocurrency policy, but there are two basic principles—principles that have been foundational to the United States—that can help Congress address these concerns.
The first one relates to the Fourth Amendment to the U.S. Constitution, which protects Americans against warrantless searches and seizures by the government. Thanks to the Bank Secrecy Act and its many amendments, Fourth Amendment protections have been all but eliminated when it comes to Americans’ financial records. The BSA gives law enforcement warrantless access to Americans’ financial records when they use a bank or any other financial institution.
Rather than adapt to the technology, many policymakers want to force crypto to adapt to a system that was designed to work with financial intermediaries. But crypto often upends the traditional role of intermediaries, thus forcing Congress to deal with how it has used those intermediaries to end-run the Fourth Amendment.
Many members of Congress (and the financial industry) now view the Fourth Amendment as a relic, somewhere between overly burdensome and an afterthought, unapplicable to modern America. But the Fourth Amendment was never supposed to be perfect. It represents, instead, the necessarily imperfect balance between the competing interests of individuals’ financial privacy and the government’s ability to gather evidence of a crime.
Reaffirming Americans’ Fourth Amendment rights, as Congress should do, would not be a license to commit crime. It would simply mean that law enforcement must demonstrate probable cause to a judge before accessing Americans’ financial records, just as they do for other searches.
The second principle—limited government—dictates that people, not government officials, are generally the best judges of which economic transactions are in their own best interest. Yet, the federal government now dictates which methods of payments are acceptable, which special institutions may facilitate those payments, and how those institutions may operate. Some members of Congress even want cryptocurrency banned because it doesn’t fit into this government regime.
The principle of limited government also answers the critics who see crypto as a threat to the U.S. dollar. The federal government is not supposed to be the provider of Americans’ money precisely because governments tend to debase currency. The U.S. government is supposed to refrain from debasing people’s money, and to protect people’s right to use money as they see fit. The government is not supposed to control every aspect of how people use their money or even what they use for money.
Critics of crypto assume that the government’s existing monopoly on money issuance maintains the dollar standard itself, but that’s incorrect. The prevalence of the U.S. dollar grew when gold and silver were recognized as money, and it does not depend on a specific type of paper currency or digital entries. The prevalence of the U.S. dollar derives from the country’s relatively strong legal and economic systems, especially as they pertain to protecting individual property rights.
Many advocates of cryptocurrency are frustrated because the federal government has failed to uphold these limited government principles and debased the currency. Americans now have effectively one choice for money, and even the person-to-person transfer of that currency is now highly regulated and surveilled.
So, it makes sense that so many crypto proponents are cheering on these reserve proposals in the hope that they will gain wider acceptance for Bitcoin. Unfortunately, these proposals do not directly address the underlying problems that have kept U.S. crypto policy such a mess.
Cryptocurrency will remain of limited use until Congress pares back the overly invasive regulatory framework that currently governs U.S. financial markets. To do so, Congress need only reaffirm the importance of the Fourth Amendment and a limited government.
Finance
Top 5 mantras for millennials to achieve financial freedom
![Top 5 mantras for millennials to achieve financial freedom Top 5 mantras for millennials to achieve financial freedom](https://images.deccanherald.com/deccanherald%2F2024-08-19%2Fhrhxjv0q%2Fistockphoto-1346853640-612x612.jpg?rect=0%2C23%2C612%2C321&w=1200&ar=40%3A21&auto=format%2Ccompress&ogImage=true&mode=crop)
By 2030, millennials and Gen Z together will make up more than 50 per cent of India’s population. Known for making sound financial choices, millennials are much more advanced. When it comes to millennials, their investments in mutual funds, stocks, real estate and other assets are at an all-time high, for them a cookie-cutter method does not fit well and when it comes to financial protection – they opt for multiple options to put the method to madness. In the midst of the digital age’s relentless surge, millennials find themselves at the forefront of an era characterised by unprecedented connectivity and information access.
Achieving financial independence remains crucial for personal empowerment and long-term security. It allows individuals to pursue their passions, retire early, and handle unexpected challenges without financial stress. In today’s rapidly evolving digital era, leveraging technology and innovative financial tools can simplify this journey.
Let’s explore some of the top mantras to follow on this road.
Start early & invest regularly
Don’t wait for the perfect moment to begin investing—start your personal finance journey with your very first paycheck. While the retirement age has stayed the same, life expectancy has increased, necessitating a larger corpus to support a longer life. Additionally, many of us aspire to retire by 50 to pursue other interests, making early planning essential.
Consider this: if you start investing ₹5,000 per month at age 25, you could accumulate a corpus of ₹1.76 crore by age 55, assuming a 12 per cent annual return. However, if you delay and start at age 35, you’d need to invest ₹17,500 per month to reach the same amount. A 10-year delay can triple the amount you need to invest monthly. Investing early leverages compounding and the time value of money. When you’re young, you can take on more risks, benefiting from high-risk assets like equities and mutual funds.
Create multiple sources of income
Diversifying your income streams can protect you against job loss and economic downturns, while also accelerating wealth accumulation. Consider options like freelance work, side businesses, rental properties, investments in stocks or mutual funds, and passive income sources such as dividends or royalties.
During unforeseen circumstances like sudden medical emergencies, layoffs, or unexpected major expenses, having a financial safety net can mean the difference between a temporary setback and a lasting crisis. Experts recommend saving 12 months’ worth of living expenses to ensure adequate coverage.
Digital banking apps facilitate this by enabling seamless fund transfers and automated savings plans, making it easier to consistently allocate money to an emergency fund. These tools also offer features like goal tracking and notifications to help maintain regular contributions.
Eliminate debt strategically
Start by listing all your debts, including credit cards, loans, and any other liabilities. Prioritise them by interest rates, focusing on high-interest debts first, as these cost you more over time. One effective strategy is the “avalanche method,” where you pay off debts with the highest interest rates first while making minimum payments on others. Alternatively, the “snowball method” involves paying off the smallest debts first to build momentum and encourage continued progress.
Consider consolidating debts to secure lower interest rates and simplify payments. Additionally, create a realistic budget to free up extra money for debt repayment. Avoid accumulating new debt by using cash or debit for purchases instead of credit cards.
Insurance – a big must!
Before making any investment, ensure that you have adequate life and health insurance coverage. As your liabilities increase, so should your coverage amount. Prioritising insurance safeguards your financial stability and provides a safety net for unforeseen circumstances, allowing you to focus on growing your investments with peace of mind. Purchasing life insurance at a younger age offers the benefit of lower premiums, which remain constant throughout the policy term. Younger millennials too find term insurance appealing because of its simplicity and affordability, coupled with the digital era which equips them with real-time financial data, market insights, and most importantly – investment tools that can assist in making informed decisions for insuring safety and security.
All that being said, India’s millennials are still relatively new to the concept of achieving financial freedom and its imperative for them to have a roadmap in place. India has the youngest population globally. So, if our youth is financially secure, it means India’s future is also safe.
Published 19 August 2024, 01:01 IST
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