Square Inc.’s “Bitcoin Investment Whitepaper “— Creating a best practice guidance for corporate / institutional investors to invest in bitcoin
The mobile payment app provider Square Inc. is the latest public listed company to instruct its treasury department to purchase bitcoin and diversify its balance sheet. Compared to the first listed company investing in bitcoin -MicroStrategy- the Square Inc. stake with currently USD 50m in bitcoin is comparably small (MicroStrategy’s stake >USD 400m). Nonetheless the announcement of Square Inc. could have a larger impact on bitcoin adoption in the corporate / institutional space, because Square Inc. is providing a rationale of the purchase and detailed guidance for bitcoin investment at institutional scale. The Square Inc. whitepaper could provide CIOs, CFOs and treasury departments with a best practice guidance to allocate funds to bitcoin.
Why should institutional investors invest in bitcoin in the first place?
Square Inc. gives its rationale to answer this question in the whitepaper, stating.
“Given the rapid evolution of cryptocurrency and unprecedented uncertainty from a macroeconomic and currency regime perspective, we believe now is the right time for us to expand our largely USD-denominated balance sheet and make a meaningful investment in bitcoin.”
Source: Square Inc. (Bitcoin Investment Whitepaper)
Square Inc. is stressing “unprecedented uncertainty from a macroeconomic and currency regime perspective” and refers to its “largely USD-denominated balance sheet”. It could be a indication that the recent monetary measures, especially by the Federal Reserve (“USD-denominated balance sheet”)-due to the COVID-19 impact- might have accelerated the process to diversify a certain amount of Square Inc.’s balance sheet in bitcoin. Other corporate / institutional investors might face similar challenges from the macroeconomic and currency regime perspective. One reason for this is that in the past decade many corporate / institutional investors preferred USD equities and bonds over G10 equities and bonds, because USD assets were offering an outperformance.