UK businesses are increasingly turning to cryptocurrency as a strategic asset to bolster their treasury management practices. With the evolving landscape of finance and technology, integrating crypto holdings into treasury strategies presents numerous benefits, from diversification and risk mitigation to capital appreciation and innovation.

In this comprehensive guide, we look at the benefits of crypto investment for UK corporate treasuries, explore industry insider tips, and discuss five best practices for optimal treasury cryptoasset investment performance.

As businesses navigate the complexities of today's financial landscape, the role of treasury management in driving growth and resilience has become increasingly vital. Traditionally, treasury strategies have revolved around conventional assets, especially cash, stocks, and bonds.

However, the emergence of cryptocurrency as a new asset class has sparked interest among forward-thinking treasury professionals seeking to diversify their organisation’s portfolios and future-proof their financial strategies.

One of the primary benefits of holding cryptocurrency as part of a treasury strategy is diversification. Cryptocurrency offers a unique risk-return profile that is largely uncorrelated with traditional asset classes, providing businesses with an opportunity to spread risk and mitigate exposure to market volatility.

By incorporating crypto assets into their balance sheet, treasuries can diversify beyond the traditional asset classes, enhancing resilience in the face of economic uncertainty.

A good rule of thumb for treasuries is to allocate no more than 5% to 10% of their total investment portfolio to cryptocurrency, balancing potential rewards with inherent risks.

It’s also crucial to diversify institutional wealth, and crypto investment can be a smart treasury move to enter a new, exciting financial asset class and unlock growth opportunities beyond just the bonds and stocks approach.

Beyond risk mitigation, cryptocurrency presents significant potential for capital appreciation and investment growth.

As an emerging asset class, cryptocurrencies like bitcoin and ethereum, as well as many altcoins, have demonstrated their ability to skyrocket in price, outperforming traditional assets and delivering substantial returns for investors.

Of course, the flip side is that they have also declined in price significantly too, indicating the need to hedge against crypto market downside risk, which can be done with instruments such as market and limit orders, as well as price alerts.

By allocating a portion of their treasury reserves to cryptocurrency holdings, UK businesses can position themselves to capitalise on the long-term growth potential of digital assets, potentially enhancing overall profitability and shareholder value.

In addition to financial benefits, holding cryptocurrency can drive innovation and future-proofing for UK businesses. Cryptocurrency and blockchain technology have the potential to revolutionise various industries, from finance and supply chain management to healthcare and real estate.

By embracing crypto as part of their treasury strategy, businesses can stay ahead of the curve, exploring new opportunities for efficiency, transparency, and value creation in the digital economy.

While the benefits of holding cryptocurrency as part of a treasury strategy are compelling, businesses must also navigate challenges and ensure regulatory compliance.

Understanding the accounting and tax implications of crypto asset holdings on balance sheets is crucial to ensuring transparency and compliance with financial reporting standards.

Additionally, enterprise-secure storage and robust treasury management practices for digital assets, mitigating cybersecurity risks and safeguarding crypto holdings against theft or loss are critical factors.

These five best practices can help treasury professionals position their organisation for maximised crypto investment success.

1. Thorough Due Diligence
   Before adding cryptocurrency to treasury reserves, conduct comprehensive due diligence to understand the regulatory, security, and operational implications.
   Evaluate the reputation and reliability of crypto exchanges or custodians to ensure the safety and integrity of crypto holdings.
2. Strategic Allocation
   Determine an appropriate allocation of funds to cryptocurrency based on the risk tolerance, investment objectives, and financial circumstances of the business.
   Consider factors such as liquidity needs, market conditions, and long-term growth potential when deciding the percentage of treasury reserves allocated to crypto assets.
3. Robust Security Measures
   Implement robust security measures to safeguard crypto holdings against cybersecurity threats, theft, or unauthorised access.
   Use reputable crypto wallets or custodial services with multi-layered security protocols and encryption technologies to protect digital assets.
4. Continuous Monitoring and Review
   Regularly monitor the performance and volatility of crypto assets, conducting periodic reviews to assess their contribution to the overall treasury strategy.
   Stay informed about regulatory developments, market trends, and technological advancements in the crypto space to make informed decisions and adjustments as needed.

Investing in cryptocurrency as part of treasury strategy can offer UK businesses a strategic advantage as well as future-proof treasury operations as the Bank of England and Financial Conduct Authority, as well as wider society, move closer towards mainstream adoption of crypto financial, economic, transactional, and investment systems in the UK.

By embracing crypto as an asset class with high potential returns and executing ongoing best practices, treasury professionals can successfully incorporate crypto investment into their overarching portfolio strategy and goals with confidence, driving financial resilience and innovation.