What Are Bitcoin Treasuries?

Bitcoin treasuries refer to businesses that hold Bitcoin on their balance sheets. Like other assets, Bitcoin can play an important role in managing liquidity while hedging against cash devaluation. It also offers potential long-term growth.

Public companies in the United States—including non-blockchain businesses—hold roughly $50 billion in Bitcoin. Investment firms hold many billions more. The largest Bitcoin portfolios among public companies include MicroStrategy, Tesla, Coinbase, and Block. 

Here’s a closer look at Bitcoin treasury opportunities for companies looking to diversify their holdings with a modern and innovative asset class.

Bitcoin Treasuries Explained

For businesses of all sizes, managing cash and investments is a critical function. Bitcoin treasuries represent the portion of a company’s assets held in Bitcoin. More broadly, cryptocurrency treasuries encompass a range of currencies, including Ether (ETH, Ethereum’s main currency), XRP, USD Coin (USDC), and other digital assets.

If your treasury or C-suite team is weighing the role of Bitcoin in corporate finance, here are three common reasons companies allocate assets to Bitcoin treasuries.

Operational Needs

Many companies begin working with cryptocurrency organically as part of their business operations. For example, companies that accept Bitcoin for sales could wind up with a growing digital currency balance in the company’s coffers. Accepting Bitcoin as a payment method can help reach new potential customers, including some wealthy digital asset holders.

More than 15,000 businesses worldwide accept Bitcoin for payment, including those in retail, travel, entertainment, gift cards, and luxury goods. 

Currency Hedging and Diversification

Just as businesses diversify across cash, foreign currencies, and commodities like gold, some companies turn to Bitcoin as a store of value. Companies concerned about currency devaluation—whether it’s a firm in Mexico hedging against peso volatility or a U.K.-based company seeking alternatives to the British pound—may turn to Bitcoin as a non-sovereign, inflation-resistant asset.

Incorporating Bitcoin into treasury reserves can offer a hedge against fiat currency fluctuations and provide exposure to an asset class independent of traditional financial markets.

Investment Performance

Finally, treasury managers might hold Bitcoin as an investment. If a company’s leadership believes Bitcoin will increase in value in the future, it could allocate a portion of the company’s assets to Bitcoin treasuries.

While past performance is no guarantee of future success, Bitcoin has seen a massive increase in value since its inception, and many investors believe the trend will continue.

Considerations for Managing Bitcoin Treasuries

Bitcoin treasuries come with some risks and drawbacks worth considering. These include:

• Regulatory and compliance risks: Regulations and tax rules surrounding cryptocurrencies are constantly evolving. Treasury teams must stay ahead of compliance requirements across jurisdictions to avoid legal and tax pitfalls.

• Accounting challenges: Just like legal regulations, accounting rules for cryptocurrency are also developing. While the Financial Accounting Standards Board (FASB) has issued some opinions outlining Generally Accepted Accounting Principles (GAAP) for cryptocurrency, rules will likely shift as the industry matures.

• Security and custody: Unlike money held in FDIC-insured bank accounts, Bitcoin requires robust security measures. Multi-signature wallets, cold storage, and institutional-grade custody solutions are critical for protecting assets. Selecting a trusted, regulated custodian like BitGo for Bitcoin treasury management helps mitigate the risk of loss, theft, or mismanagement.

• Liquidity and risk management: Cryptocurrency is traded across many different exchanges, without a centralized marketplace like the New York Stock Exchange (NYSE). That means there aren’t designated market makers to ensure liquidity. Bitcoin treasury holders should plan for market fluctuations, hedging strategies, and timely conversions if needed.

• Governance and access controls: Blockchain transactions are one-way and can’t be reversed, making the risk of fraud, including internal misconduct, potentially more costly. Leaders should establish clear policies to prevent fraud and unauthorized transactions. 

How Institutions Secure Bitcoin Treasuries with Qualified Custody

Secure treasury storage is vital for any business with digital assets. A qualified custodian provides a level of security that should give you the same confidence as if you held your physical gold at Fort Knox.

A trusted custodian like BitGo offers key security features to keep client assets safe and accessible only by the client’s authorized representatives:

• Combination of hot and cold storage: BitGo features hot (always online) storage solutions for quick withdrawals and cold (always offline) wallets for long-term storage with the highest levels of security.

• Multisignature wallets: Multisignature wallets require authorization from multiple authorized parties to withdraw. 

• Role-based access policies: To guard against malicious activity, BitGo customers can set rules to ensure that only authorized users can access cryptocurrency accounts and assets.

The best custodians use bank-level encryption and cybersecurity best practices. Because a single mistake can be extremely costly, trust only industry-leading Bitcoin treasury solutions.

Choosing BitGo for Treasury Management

BitGo is a best-in-class provider of Bitcoin treasury management services. With exceptional customer service and institutional-grade security, you can rest easy knowing BitGo is your Bitcoin secure treasury storage partner.

For institutional stakeholders seeking robust and trusted solutions, research the platforms that best fit your unique needs. BitGo features several options for secure Bitcoin custodial wallets and a range of additional cryptocurrency services. Contact BitGo today to learn how we can help or get started right away.

FAQ

What is the purpose of Bitcoin treasuries?

Bitcoin treasuries are a way for businesses to diversify their currency holdings for operational, risk management, or investment purposes. Many view Bitcoin as an asset that can hedge against inflation and other economic uncertainties.

How do organizations use Bitcoin treasuries effectively?

To use Bitcoin treasuries most effectively, businesses and institutional investors should understand how Bitcoin fits into their treasury plans and asset mix. With a well-constructed plan, treasury managers can find a compatible custodian to effectively use Bitcoin for their operations, risk management, or investment goals.

What are the risks associated with holding Bitcoin in treasuries?

While Bitcoin transactions are secured through cryptographic protocols, holding Bitcoin in treasuries involves market volatility, regulatory uncertainty, and liquidity risks. Savvy investors and businesses consider these risks when finding the right balance between cryptocurrency and other portfolio assets.

How do Bitcoin treasuries differ from traditional treasuries?

Bitcoin treasuries require a higher level of technical and security expertise than holding cash in a bank or investment assets in a brokerage account. Bitcoin treasuries are typically held through a trusted, secure custodian like BitGo.

What types of entities typically hold Bitcoin treasuries?

Any type of business or investment manager could hold Bitcoin treasuries. That includes small businesses, large corporations, family offices, and companies across industries looking to diversify their assets.