FROM RESERVE ASSET TO FINANCIAL INNOVATOR: BITCOIN’S EXPANDING ROLE IN CORPORATE FINANCE

The increasing number of corporations allocating part of their treasuries to Bitcoin has certainly captured headlines. Thanks in part to a crypto-friendly Trump administration and the legitimacy that ETF approvals have delivered, Bitcoin is very much on treasurers’ radars. 

Over 80 public companies are already investing in Bitcoin and the amount of Bitcoin held in the treasuries of thesecompanies is currently worth over $50bn. 

The US government’s Strategic Bitcoin Reserve and other similar proposals being considered by several US states also represents a strong tailwind in the sector, as it further legitimises Bitcoin in the eyes of public companies and investors.

It’s not just cryptocurrency and blockchain companies making this leap. Fintechs, scientific companies and AI ventures are all realising the inflationary hedge benefits that holding Bitcoin can deliver. Even shareholders are taking note, with the National Center for Public Policy Research submitting proposals for the likes of Amazon and Microsoft to invest in Bitcoin. Although the Microsoft proposal was unsuccessful on this occasion, this is likely to be an issue that continues to resurface. 

While this trend reflects the growing acceptance of Bitcoin, it represents just one part of the story. Bitcoin as a store of value is the dominant theme of conversation, but this overlooks the potential of the underlying blockchain technology and its potential to change financial services. One such area is tokenisation.

Tokenisation has become somewhat of a buzzword, but it represents a truly revolutionary approach to how traditional financial instruments are issued and traded. Bitcoin is providing the infrastructure for different types of tokenised assets, which treasuries might also want to consider allocating to.

Tokenised investment opportunities

Physical and financial assets, from real estate to US Treasury Bills, can be tokenised using blockchain technology, meaning that a digital representation of the asset is created on the blockchain to allow them to be exchanged securely in real time. Tokenised bonds and funds are not just refining existing processes, they're making them more efficient, transparent and accessible.

By streamlining operations and reducing costs, tokenisation is lowering barriers and opening up opportunities that were previously out of reach for many in the financial sector, particularly in regions and industries that have historically struggled to access capital through legacy markets and organisations.

NexBridge’s USTBL, for instance, is a token that invests in short-term US Treasury Bills. USTBL recently raised $30 million on Bitfinex Securities, drawing interest from some investors who may typically struggle to access dollar-denominated financial instruments directly.

Tokenised sovereign debt and dedicated digital asset investment platforms are also being launched by governments globally; take Hong Kong’s tokenised green bond launched in April 2023, or Thailand’s pilot programme for new tokenised bonds in the 2025 fiscal year. 

Built-in compliance

Sceptics might view tokenised securities as an extension of some of the darker corners of the crypto world where there is a perception that criminals launder funds unchecked.

This is absolutely not the case. Tokenised securities have built-in compliance and KYC features that leverage the benefits of blockchain technology. 

The Bitcoin blockchain offers a particularly robust solution to KYC. The Liquid Network – a side-chain of Bitcoin – has whitelisting functionality, which means only a list of approved entities or wallet addresses can participate in specific issuances. This helps to mitigate risks associated with unauthorised access, fraud, or malicious activities while adhering to compliance standards.

While there has been some degree of uncertainty regarding the regulatory status of tokenised securities, this is beginning to change. Bitcoin as a blockchain ecosystem already has an advantage over other blockchains, given that bitcoin is commonly viewed as a commodity. Other tokenisation ecosystems lack this clarity, meaning Bitcoin is a cleaner and safer choice for asset tokenisation. 

With the new change of president, pressure is growing – including from the likes of Larry Fink – for the U.S. to put in place clear rules and regulations around tokenised securities. There is a good chance this will happen during Trump’s term and, if this is the case, it could provide the catalyst for exponential growth of tokenised securities. 

Embracing the opportunity

For corporate and public treasurers, blockchain is powering tokenised investment opportunities that suit a whole range of risk appetites. Even those that might never feel comfortable allocating to Bitcoin directly can access innovative investment products thanks to Bitcoin’s underlying technology. 

Tokenised securities are still very much a nascent asset class, but if the political winds continue to move favourably, they could become more mainstream investment tools much sooner than anyone anticipated. 

It will then be imperative that treasurers understand the yield, stability and liquidity that tokenised products can deliver. Perhaps we will start seeing shareholders move on from demanding Bitcoin allocation to putting pressure on treasurers to invest in tokenised assets. 

Bitcoin and tokenised securities are here to stay, and their role in corporate finance is set to expand in ways we are only beginning to grasp.

Jesse Knutson, Head of Operations, Bitfinex Securities