If you have been playing at bitcoin casinos as long as we have, you have probably also created a reserve of bitcoin and cryptocurrencies thanks to the awareness you have of the game changing nature of this new technology. Keeping your savings in bitcoin instead of in fiat currencies is the smartest move many of us will have made over the past ten years, and it looks like things are going to get even better for those on the forefront of moving their wealth on-chain.
So if you have personal bitcoin reserves, you might also be a company owner, and if that’s the case then surely you have thought about creating a bitcoin reserve to help offset the negative impacts of inflation and systemic banking risk. Here we give you some simple tips on doing that which might make the world of difference to your company’s prospects over the coming years.
Why a Bitcoin Reserve for Your Company?
Before diving into the how-to, let’s touch on why a bitcoin reserve makes sense. Unlike fiat currencies, which lose value over time due to inflation and central bank policies, bitcoin’s fixed supply of 21 million coins makes it a hedge against monetary devaluation. Its decentralized nature shields it from the risks of traditional banking systems, which can falter during economic crises. By allocating a portion of your company’s treasury to bitcoin, you’re not just protecting your capital—you’re positioning your business to thrive in a future where digital assets are king.
This is often seen as a strategy that can only benefit large corporations that can raise capital to acquire bitcoin (e.g, the ‘Strategy’ route), but it could be useful for every single business on earth. Imagine holding a small reserve that offsets losses due to inflation in other areas of the business. It could become your best asset to borrow against for future expansion and business plans.
Step 1: Assess Your Company’s Financial Position
Start by evaluating your company’s cash flow, operational expenses, and long-term financial goals. Determine how much capital you can comfortably allocate to a bitcoin reserve without compromising day-to-day operations. A good rule of thumb is to treat your bitcoin reserve like a long-term investment—only commit funds you won’t need to liquidate in the short term. For example, if your company holds excess cash reserves earning minimal interest in a bank, consider reallocating a portion to bitcoin to counter inflation’s erosive effects.
Step 2: Develop a Clear Bitcoin Acquisition Strategy
Building a bitcoin reserve requires a disciplined approach. Decide whether you’ll acquire bitcoin through a one-time purchase, periodic buys (dollar-cost averaging), or a combination of both. Dollar-cost averaging—buying a fixed amount of bitcoin at regular intervals—can mitigate the impact of bitcoin’s price volatility. Work with reputable, regulated cryptocurrency exchanges or custodians to ensure secure transactions. Platforms like Coinbase, Kraken, or Gemini offer business accounts tailored for corporate purchases, with robust security measures to protect your assets.
Step 3: Prioritize Secure Storage
Once you’ve acquired bitcoin, safeguarding it is critical. The general advise is to avoid leaving large amounts on exchanges, which can be vulnerable to hacks and instead to opt for a secure storage solution like a hardware wallet (e.g., Ledger or Trezor) or a multi-signature wallet for added protection. Ledger has recently introduced a controversial backup solution which introduces third party vulnerability compared to Trezor and other more
However, this comes with trustee risks, so you need to balance the risks and take a practical approach. Sometimes, holding bitcoin on a trusted exchange is the right thing to do, that isn’t what most bitcoin devotees want you to hear, but a lot of bitcoin have been lost when someone forgets the password, loses their laptop, or even dies without sharing the information about how it was stored. For more on the pros and cons check out our article on Trezor vs Ledger.
For larger reserves, consider partnering with institutional-grade custodians like Fidelity Digital Assets or BitGo, which offer enterprise-level security and insurance. Ensure your company’s leadership team understands the importance of private key management—losing access to your bitcoin could be catastrophic.
Step 4: Account for Volatility and Risk Management
Bitcoin’s price can be a wild ride, so prepare for volatility. Diversify your treasury by maintaining a mix of bitcoin and traditional assets like cash or bonds to balance risk. Establish clear guidelines for when and how to rebalance your reserve. For instance, if bitcoin’s value surges, you might sell a portion to lock in profits and reinvest in other areas of your business. Conversely, during price dips, consider increasing your bitcoin allocation if your financial position allows. A well-defined risk management plan keeps your reserve strategy aligned with your company’s goals.
Step 5: Stay Compliant with Regulations
Navigating the regulatory landscape is crucial when holding bitcoin as a corporate asset. Consult with legal and tax professionals to ensure compliance with local laws, especially regarding reporting and capital gains taxes. In some jurisdictions, holding bitcoin may require specific disclosures or accounting practices. For example, in the U.S., the IRS treats bitcoin as property, meaning gains from sales are subject to capital gains tax. Staying proactive about compliance protects your company from legal risks and ensures transparency.
It may be tempting to consider loaning bitcoin from one company to another, perhaps this could be a way to release cash from bitcoin without oncurring tax obligations?
Transferring Bitcoin as a loan between your companies and paying yourself cash is unlikely to avoid tax entirely. The loan may be treated as a disposal, for example in the UK it could trigger Corporation Tax on Company A’s Bitcoin gains, and the cash payment could incur Dividend Tax, Income Tax, or a Section 455 charge. HMRC’s anti-avoidance rules and connected persons provisions make it challenging to bypass tax liabilities in this way.
To explore tax-efficient options, we would recommend consulting a crypto-specialist tax advisor. They can evaluate your companies’ structures, the Bitcoin’s cost basis, and your personal tax position to devise a compliant strategy.
Step 6: Educate Your Team and Stakeholders
A bitcoin reserve strategy will only succeed with buy-in from your leadership team and stakeholders. Educate them about bitcoin’s value proposition, its role as an inflation hedge, and the safeguards you’ve put in place. Transparency builds trust and ensures everyone understands the long-term vision. Consider hosting workshops or bringing in crypto experts to answer questions and address concerns. The more your team understands the “why” behind your reserve, the more confident they’ll be in the strategy.
Step 7: Monitor and Adapt
The crypto market moves fast, so stay informed about bitcoin’s price trends, market developments, and regulatory changes. Regularly review your reserve strategy to ensure it aligns with your company’s financial objectives. Tools like CoinMarketCap or Glassnode can provide insights into market trends, while newsletters and reputable crypto news outlets keep you updated on industry shifts. Be prepared to adapt your approach as the economic and regulatory environment evolves.
The Bigger Picture: Positioning for the Future
By establishing a bitcoin reserve, you’re not just protecting your company from inflation and banking risks—you’re aligning with a financial revolution. Companies like MicroStrategy and Tesla have already embraced bitcoin as a treasury asset, reaping significant rewards as its value appreciates. Your business could follow suit, gaining a competitive edge in a world increasingly driven by decentralized finance.
The past decade has shown that holding bitcoin can be a game-changer for personal wealth. Now, it’s time to apply that same forward-thinking mindset to your company. With careful planning, secure execution, and a long-term perspective, a bitcoin reserve could be the key to ensuring your business thrives in the face of economic uncertainty. So, take the leap, secure your company’s future, and join the growing ranks of businesses betting on bitcoin’s unstoppable rise.