UHY Ross Brooke Chartered Accountants

Why hold Bitcoin or crypto assets in your balance sheet?

cryptocurrency accountant

We are seeing more and more SME’s holding Bitcoin in their balance sheet and when major household names are also holding Bitcoin as part of their reserves, it’s clear that crypto assets are perceived as an important part of treasury management for many.

Holding Bitcoin or other crypto currency in a company’s balance sheet can provide several potential benefits, but also comes with risk.

Bitcoin is often viewed as a digital gold and a potential hedge against inflation and so by holding Bitcoin, a company can conceivably protect itself against the effects of inflation on its cash reserves. Of course, the value of that crypto asset can go up or down, and at present, that carries a higher level of risk than inflation against traditional liquid assets.

Holding Bitcoin can provide a level of diversification for a company’s investment portfolio. Diversification is usually a good way to spread risk across different asset classes, although it does depend on how risky the assets are.

Bitcoin has been known to experience significant price volatility. On the plus side, there could be significant capital appreciation. Sell high, buy low, but how do you know when that critical moment is?

Crypto assets are still something of an unknown commodity yet regulatory bodies and centralised banks are taking more of an interest in them. The potential regulatory and security risks associated with storing and securing the cryptocurrency are clear, as demonstrated in the recent FTX scandal, and where very large sums of money can be lost.

It’s important for companies to carefully consider these risks before making the decision to hold Bitcoin or other crypto assets in their balance sheet, and to develop a clear strategy for managing and monitoring their cryptocurrency investments.

Taxation considerations will also apply. The tax rules can be very complex and vary across different countries, but finding an accountant who can advise on tax on crypto assets can be tricky. It’s important to have the support of a team of crypto tax specialists that understand the rules and can guide you in the right direction.

Fortunately for our clients, we have specialists in corporate finance and accounts, crypto tax and even international business, so there’s not much we can’t help forward-facing businesses with.

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