MicroStrategy Effect: How Should Corporates Manage Their Crypto Holdings?

发布于 Oct 5, 2021 | 部落格

Bitcoin Abstract

MicroStrategy, a business intelligence software firm, has been causing a stir since August 2020. Under the direction of its CEO, Michael Saylor, the company headquartered in San Francisco has aggressively buy and accumulate BTC. Its latest Bitcoin acquisition on September 13th includes 5,050 more tokens, bringing its total holding to over $3.1 billion worth of the original cryptocurrency. This unwavering commitment to the world’s most popular digital asset has done much to buoy the crypto markets during periods of volatility. It has also provided an unlikely blueprint for fellow institutions to enter the space.

Last year, MicroStrategy issued $500M worth of corporate debt so that they could “buy the dip” and double-down on their Bitcoin position. Although MicroStrategy has positioned itself as a leader in the Bitcoin space, it’s not the only Silicon Valley firm to stick its finger in the crypto pie. A rising number of corporations are keeping cryptocurrencies on their books, either as an inflation hedge, or simply as a speculative asset.

Other notable publicly-traded companies that have followed MicroStrategy’s lead include electric vehicle manufacturer Tesla, under the guidance of crypto provocateur Elon Musk. PayPal and Jack Dorsey’s payments platform, Square Inc, are also part of the growing list.

Until recently, the idea that these non-crypto corporations would be acquiring Bitcoin would have seemed ludicrous. Bitcoin has long had a reputation as a volatile and fringe asset class not to be trusted by any serious business. Crypto also represents a completely new paradigm for institutions to contend with. There are challenges in place not only in terms of price, trading, onboarding, and accounting, but also keeping it secure against hacks and cybersecurity breaches.

This stigma seems to have subsided, heralding in a wave of mass adoption from institutions across multiple industries. However, news of the rise of corporate crypto brings with it the question: How should these companies manage their rapidly growing crypto holdings? How can they mitigate risks?

As they say: with great crypto asset accumulation comes great responsibility.

How should Massive Corporate Crypto Holdings Be Managed?

Choosing the right crypto holding solution

To date, few wallet systems offer the flexibility and oversight like corporate banking interfaces.

When holding large quantities of cryptocurrency, it’s important that investors choose a solution that supports multiple wallets, currencies, and users. In an ideal scenario, assets are divided and risks are mitigated and the funds are managed by a group of vetted individuals.

It’s also crucial for firms to have the ability to configure policies at a granular level. There should be policies in place that can be triggered when specific criteria, like transaction size, are met. These measures should be defined for each individual that has access to the holdings. These controls mitigate risks so that large sums of cryptocurrency cannot be moved around easily.

Some examples of granular control policies that can be put in place include:

  1. Limiting withdrawal ability to certain individuals

Ensuring that withdrawals can only be made to whitelisted wallet addresses (an “allow-list”) is paramount to establishing and maintaining the security of your digital asset holdings. Only senior, screened employees should have access to accounts, and the ability to withdraw funds. This will prevent a sudden, large drainage of funds.

  1. Requiring a certain number of approvals before executing transactions 

This system, also called “m-of-n” authorization, means that your organization is dividing up responsibility for the cryptocurrency holdings among multiple people. However, it’s important for this authorization feature to support hierarchical approval levels for stakeholders within the organization. After all, an operator’s approval is not equal to the CFO’s approval, and your policies and management should reflect that.

  1. Placing limits on the funds available in a specific wallet instance 

Needless to say, this is a good risk mitigation practice to have in place to avoid a sudden withdrawal of large amounts of Bitcoin. But, ensuring that a wallet instance never goes below a certain threshold is also good cash-flow management, if the wallet is used for critical payments. Much like a fiat currency ledger, having this feature in place is good bookkeeping. It’s important to keep track of how much is coming in, going out, and who is performing the transactions.

  1. Having role-based access to your corporate wallet system 

Role-based access ensures that the right people have access privileges in line with their position within the company. It also ensures a healthy system of checks and balances, so that one single user is not allowed to have end-to-end control over transaction operations, limiting the possibility of nefarious activities. For example: it’s important to segregate the users creating the policies from the users that operate transactions. Similarly, it’s important to segregate users that approve transactions from those who perform audits. Having a role-based system in place also guarantees better accountability throughout the transaction process.

  1. Have insurance in place to hedge potential losses

As the value of the crypto industry grows and adoption increases, so too has the importance of insuring your digital assets. With crypto-related security breaches making news headlines, insurance has become a crucial feature for those looking for crypto holding solutions.

Increased regulatory clarity has elevated cryptocurrency’s status as a sought-after digital commodity. Previously skeptical individuals and companies, insurance firms, are now more open and welcoming to cryptocurrency and digital assets. Insurance firms like Lloyd’s have started introducing liability insurance policies for cryptocurrency held in hot wallets, with a dynamic limit that increases or decreases inline with crypto asset price changes. 

CYBAVO Welcomes Corporate Institutions to Crypto 

CYBAVO VAULT offers an intuitive interface from which enterprises can easily and securely manage their digital assets. Users can to create currency-specific wallets as well as wallets for a specific team member or department in the organization.  

Each wallet can be set up with granular policies, tailored to the organization’s needs. Different users can be added to each account and their roles can be defined with set permissions and limits. Wallet-specific security features like m-of-n authorization, coupled with approval chains can be custom designed. CYBAVO VAULT also features wallets with scheduled withdrawal windows, automatic payment features triggered by balance monitoring, and comprehensive access to transaction logs in order to query all financial activity efficiently. 

CYBAVO clients can enjoy additional peace of mind that extends beyond the proven cybersecurity bona fides of our team. Last year, CYBAVO signed an agreement with an S&P AA-rated international re-insurance company to provide additional security to our institutional wallet customers. This means CYBAVO customers enjoy insurance coverage in the event of a theft of assets from CYBAVO VAULT, CYBAVO’s institutional wallet solution.

To learn more, get in touch with our team today!