Key Insights
- Morningstar DBRS has issued a warning that uncertainties in regulations, volatility, liquidity difficulties, counterparty risks, and custody concerns could potentially heighten the credit risk profile for businesses that choose a crypto treasury approach.
- The report indicates that the ownership of corporate bitcoins is significantly concentrated, with a singular company, Strategy, controlling nearly two-thirds of the available corporate bitcoin reserves.
The corporate embrace of cryptocurrencies is evolving, moving beyond simple transactions to include bitcoin and similar digital assets as principal treasury contents. A report from rating agency Morningstar DBRS raises concerns that this could amplify associated credit risks.
According to BitcoinTreasuries.net, approximately 3.68 million BTC, translating to around $428 billion as of August 19, is held by various entities, including companies, ETFs, governments, and custodians—representing about 18% of the total bitcoin supply.
Funds hold 40% of the overall assets, while public enterprises account for 27%. This concentration of exposure remains highly skewed, notably with Strategy (MSTR) holding over 629,000 BTC, equating to about 64% of all public company treasury assets, as highlighted in the report.
Morningstar DBRS points to various vulnerabilities in corporate cryptocurrency strategies, including regulatory and liquidity concerns, especially during turbulent market moments. Heavy reliance on bitcoin could potentially disrupt liquidity management due to the cryptocurrency’s notorious volatility. Additionally, the differing qualities of tokens introduce unique technological and governance challenges, with security around custodial arrangements remaining a significant issue.
The landscape for corporate cryptocurrency treasury strategies appears to be on an upward trend with companies like Strategy and MARA Holdings (MARA) at the forefront. Morningstar DBRS warns that the current volatility, concentration of holdings, and complicated regulatory environment may drastically alter how credit markets view corporate risks.
