Diversifying Your Institutional Wealth: Why Crypto is the Smartest Treasury Strategy
As a business existing in the modern world, you have to stay ahead of the curve to survive and thrive. The emerging shift towards cryptocurrency adoption has taken the world by storm in recent years from both a consumer and institutional standpoint. Bitcoin has, of course, been a driving power behind the attention being directed towards crypto – it’s hard to ignore an asset that’s grown by over 31,000% in just a decade, after all – but there is so much more to the industry than just one currency and exploring the wider industry could help identify new opportunities, It’s an interesting time to start thinking about how your institution could benefit from a crypto treasury strategy, as more and more companies are looking to allocate part or all of their capital into bitcoin or other digital assets. Just look at the growing number of companies like MicroStrategy or Tesla, both large and small, looking to diversify their balance sheets away from low to negative-yielding fiat or traditional investments.
For more information on the services that are available, get in touch with our expert crypto team here at BCB Group today.
Corporate Treasuries – Adoption of Digital as a Strategy – What are the Benefits?
Most people will have heard how major tech firms MicroStrategy, Square and Tesla have ploughed billions into bitcoin. Whatever the direct financial effects of these investments on their respective businesses, the impact on the wider economic environment has been sizeable. Indeed, more businesses are beginning to seriously float the idea that they too could have digital assets on their balance sheets.
The actions of MicroStrategy, Square and Tesla, who together have bought billions of dollars worth of Bitcoin, have now added something significant to the argument ‘for’ digital assets as a corporate treasury investment.
The spectre of inflation and a generally higher cost of capital are conspiring with low-yielding returns on traditional corporate investments to steer treasurers towards new ways of generating returns. The reason is simple: holding large pools of excess cash has become very expensive.
Of course, Bitcoin falls well outside of the boundaries of normal assets, but The now far greater regulatory clarity in western jurisdictions is good for investors with the will to shape their activities in terms of diversifying their assets.
For businesses struggling with poor returns on traditional assets, yet still holding on to views of crypto as being in some way roguish, the message is clear: the world has changed and the digital asset has changed with it.
Why More Corporates are Considering Adding Crypto to their Corporate Treasuries
It’s not just the likes of Microstrategy, Tesla and Square – countless others are getting in on the act too – from IKEA to the Association of Corporate Treasurers. Geely Auto Group, the largest shareholder in the Volvo automotive brand, is also getting in the game with a vision for incorporating decentralized applications into vehicles throughout China in the future, while also adding crypto to its treasury.
In a recent study, the European Commission estimates that enterprise-level businesses on the continent can close a €25-€30 billion gap in financing with digital assets.
Family offices are also getting in on the act. Goldman Sachs estimates that 15% of family offices around the world own cryptocurrency assets. That includes 25% of family offices located in the Americas.
Corporates are using crypto assets, precious metals and traditional currencies as a way to diversify investments geographically and protect capital from potential currency debasement in the future.
Hedging against debasement and inflation is one reason it’s a great idea to have crypto assets as part of a corporate treasury. Even if large-scale debasement of currencies doesn’t happen for decades, enterprises of all sizes can still benefit from a first-mover advantage. Even 13 years after the inception of bitcoin, the crypto asset class is still maturing.
Ben started off his career as a military officer before moving into banking as an emerging markets equity sales trader at a large investment bank. He was top-rated, with over seven years’ experience before he moved into the digital assets world at the start of 2018.