With major companies such as Tesla, Square, and MicroStrategy revealing that they have bought, or they intend to Buy Bitcoin as an investment and storing it as a reserve (and, in some cases, using it to complete transactions), the debate over whether other companies should follow suit has gathered traction.
Should Companies Invest In Bitcoin?
Many cryptocurrency investors, both corporate and personal, want to see the digital currency grow and develop because they acknowledge the currency’s value without a state price cap.
As a new asset class, Bitcoin took some time to establish a price history and a sense of its cycles. Most educated investors now understand the value proposition of cryptocurrency, and it is regarded as a welcome asset to diversify and extend their primarily fiat-denominated balance sheets. Furthermore, given the current negative interest rate environment, businesses are finding it prohibitively expensive to store cash. Thus, purchasing Bitcoin appears to be a more reasonable option.
The primary function of money is to serve as a store of value or a means of transferring purchasing power over time and space. Well-established fiat currencies, such as the US dollar or the Euro, can also be considered good value stores. Fiat currency confidence is based on faith in the government (e.g., to wisely manage their monetary policy). There is a lot of efficiency in putting all of your faith in one institution, but there are also many risks. Government actions can cause fiat currencies to lose confidence and devalue. In times of crisis, short-term pressures may override concerns about long-term credibility.
How Companies Can Buy Bitcoin As An Investment
This may seem difficult for companies who are newbies to cryptocurrencies investments. What is the best place to buy Bitcoin, how do you do it, and where do you keep it?
Buying Bitcoin on a cryptocurrency exchange is the usual way to buy Bitcoin. They allow users to deposit money into their account by bank transfer and place orders on their order book, just like any other standard brokerage account.
Open a corporate cryptocurrency exchange account
To buy Bitcoin as a company, you must first register with a cryptocurrency exchange that offers specialized corporate accounts. This is significant because allowing “others” to purchase assets in the company’s name is problematic under various laws worldwide.
Opening a personal account and trading under the company’s name is not a good option, as it would greatly complicate your tax declaration and introduce new tax issues relating to your crypto holdings. Furthermore, you will typically have higher funding limits and better customer service than you would with a personal account.
Buy Bitcoin
The next step in purchasing Bitcoin is to place an order. To begin, transfer funds from your company’s bank account to the exchange (euros, dollars, pounds, etc.). Some corporate bank accounts prohibit transactions to and from cryptocurrency exchanges, so check with your bank ahead of time to see what their crypto exchange policy is.
After the money has arrived at the exchange, you must place your order. In general, there are two kinds of orders. If you want to buy at the current bitcoin price, you submit a ‘market order’, and if you want to buy at a predetermined price, you submit a ‘limit order.’
Protect your Bitcoins
After purchasing Bitcoin on an exchange, you have two options for storing it.1. Leave them in the custody of the exchange from whence you purchased them.2. Take control of your bitcoins by withdrawing them from the exchange and storing them in your bitcoin wallet.
You might wonder what the difference is between third-party and self-custody. Users can truly self-custody their digital assets, which is one of the accomplishments of cryptocurrencies like bitcoin. Users save their bitcoin in a bitcoin wallet, which manages the user’s private key and signing transactions. Bitcoin miners confirm that a transaction is signed by the valid private key associated with the bitcoins involved before adding it to the Blockchain.
Bitcoin And Taxes
As cryptocurrencies have grown in popularity as a store of wealth, taxing authorities worldwide have reacted with a variety of tax rules. Every country has its tax law that applies to enterprises based in that country. Even though there is still a gray area in cryptocurrency tax regulations, it is becoming increasingly crucial for companies to understand the taxes rules and regulations that apply to Bitcoin transactions in their jurisdiction.
