Altcoins and initial cryptocurrency offerings (ICOs) can be tough for investors to analyze because there are few good comparisons. Value investors, in particular, can have a tough time with cryptocurrencies because there are few good comparisons with stocks.

There is one stock that can teach us something about cryptocurrency it is De La Rue (OTC: DLUEY). De La Rue is the world’s producer of paper currency; it prints money for such diverse countries as the United Kingdom, Venezuela, and the Solomon Islands. The company claims to print seven billion banknotes every year and export them to 142 countries.

Since De La Rue prints currency it is sort of like a cryptocurrency. De La Rue can also be compared to ICOs, because it makes some of its revenues from currency issues. The process is different, but the underlying principle is the same.

De La Rue competes with blockchain companies in another way by issuing security products such as passports. The company claims to print more than 15 million passports a year.

How Blockchain and Cryptocurrency Threaten De La Rue

Blockchain and cryptocurrency are both threats and opportunities for De La Rue. Widespread use of any sort of digital cash would certainly cut into its business.

A greater problem might be that cryptocurrency would be far easier for governments to create and issue than paper money. All that would be required is a team of geeks to design the currency, which can be done fairly quickly with off-the shelf technology, and mining rigs to generate it.

Ethereum and its imitators are major threats to De La Rue because they come with what amounts to build your own cryptocurrency kits. One of the most disruptive features in Ethereum is ERC-20; a set of protocols that makes it easy to create an altcoin that is interchangeable with the world’s second-most popular cryptocurrency Ethereum, or Ether. Several other blockchain solutions including Waves come with similar capability.

The government of at least one nation; the Republic of Estonia, been working on a national cryptocurrency with Ethereum creator Vitalik Buterin, CNBC reported in August. Estonia is planning an ICO for a cryptocurrency called estcoin in the near future, Kaspar Korjus, the managing director of the country’s e-Residency program revealed on 18 December 2017.

How Cryptocurrency can sink De La Rue’s business

Many details of estcoin are unavailable but a successful launch of it would be trouble for De La Rue. Small nations with limited resources will find cryptocurrencies like estcoin highly attractive because they would eliminate printing costs.

Likely adopters are developing nations like Kenya where 31 million people used various mobile payment applications in September 2016, Mobile World Live reported. Such apps are popular in Kenya where almost everybody has a mobile phone, but man people lack bank access. A next logical step would be offering a national cryptocurrency to mobile pay users.

Governments have a strong incentive to issue a national cryptocurrency because they can generate revenue by mining it. Bitcoin miners in Venezuela were making around $500 (€414.96) a month in September 2017, The Atlantic reported. One cryptocurrency called Einsteinium (EMC20) even comes with a built-in mining tax to fund scientific research. The Einsteinium mining tax would serve as a model for national cryptocurrency.

Why Governments would prefer Cryptocurrency

That means a cryptocurrency can theoretically pay for itself, while governments have to pay for paper notes from De La Rue. Those costs can be high, particularly to countries wracked by inflation, in April 2016; Bloomberg reported that Venezuela was unable to pay its printing bill at De La Rue.

Politicians are already noticing the advantages of cryptocurrency and moving towards. A leader is Venezuelan president Nicolas Maduro whose government has been hostile to cryptocurrency miners.

“Venezuela will create a cryptocurrency,” Maduro said in a 3 December television broadcast. The proposed cryptocurrency will be backed by Venezuela’s gold, diamond, and oil reserves and called the Petro, Reuters reported.

There is some sound economic thinking behind the Petro; since it would be backed oil or gold the altcoin might be accepted where Venezuela’s worthless currency the Bolivar is not. Another advantage is that the government can generate much needed revenue by mining the Petro.

No other details of the cryptocurrency or its value are available, but Maduro’s plan should worry De La Rue. If a hyperinflation-wracked nation with a basket-case economy like Venezuela can launch a successful altcoin, any country can.

Is De La Rue Making Money?

Such cryptocurrency plans are a threat to De La Rue because it is not making that much. The company reported revenues of just $586.04 million (€486.34 million) and a net income of only $49.96 million (€41.46 million) on March 31, 2017.

Revenues at De La Rue have been falling for some time. The company reported $820.91 million (€706.18 million) in revenues in September 2014; that fell to $607.53 million (€504.20) in September 2015, and rose slightly to $629.41 million (€522.35 million). Revenues fell again to $586.04 million (€486.36 million) in March 2017 – which is the latest available number.

Nor is there much cash at De La Rue, it reported just $73.77 million (€61.22 million) in cash from operations and only $38.30 million (€31.79 million) in cash and short-term investments on March 31, 2017. That raises serious questions about the ICO concept of making money by issuing cryptocurrency.

The limited resources mean that all it would take is a few companies switching to altcoins to sink De La Rue’s business. Falling demand for paper money might drive cryptocurrency demand by forcing De La Rue to charge more for printing. That would give governments another incentive to start issuing cryptocurrency.

The company that prints money has very limited value, De La Rue reported assets of $562.34 million (€466.69 million) on March 31, 2017. The company had a market capitalization of $900.30 million (€747.17 million) on 29 December 2017. That was based on a stock price of $27.47 (€27.80) a share on 2 January 2018.

Perhaps some blockchain entrepreneurs had better rethink their business plan of generating revenue by issuing currency. Printing currency is not that lucrative at De La Rue, one of the world’s largest money printers.

A Blockchain Opportunity for De La Rue

There are some potential opportunities for De La Rue in the blockchain. It is strangely centered in Estonia’s e-Residency program.

The e-Residency scheme allows people outside the Baltic Republic and European Union member to become legal residents of the country a fee. One of the benefits from the e-Residency is a passport, which can be printed by De La Rue. The e-Residents can go to Estonian consulates or embassies and order a regular passport.

If a batch of countries start offering something like e-Residency that might be a new business for De La Rue. Many smaller nations might start dabbling in e-Residency because of the potential revenue.

Deloitte figures cited by Korjus indicate Estonia has already raised €14.4 million ($17.08 million or 224,749 ETH) from the program. Deloitte also predicted that the e-Residency revenue will grow to €1.8 billion ($2.13 billion, or 28.10 million ETH) by 2025. Numbers like that are sure to inspire many cash-strapped countries to get into the e-Residency business.

Despite that opportunity, De La Rue is a lousy stock that investors should stay away from because it makes little money. Those seeking to cash in on ICOs should take a hard look at De La Rue it proves that there is little profit from currency creation.