Cryptocurrencies Are Keeping Corporate Secrets

More companies are holding on to Bitcoin then you may know about and they’re using tricks worthy of the Panama Papers.

Patrick Tan
Mar 12 · 6 min read
Door treatment seemed unnecessarily stealthy. (Photo by Stefan Steinbauer on Unsplash)

or years, Thomas Rosemont had finished off every Friday evening with a pint of IPA at a local bar and his favorite pizza off their “home style” menu.

And for years Rosemont had raved about the bar’s pizza, claiming that it was the best pizza in town and he couldn’t understand why no one else seemed to like it as much.

The flaky, doughy, perfectly crisp crust, just the right amount of pepperoni and cheese, and a thick, luscious rich marinara sauce made it the perfect greasy accompaniment to be washed down with the cool bubbly-sweet bitterness of his favorite IPA.

And every time he asked the bartender how they made their pizzas, they’d just shrug nonchalantly.

How did a dive bar make such great pizza ?— and whenever friends from out of town were visiting, Rosemont would always take them to the bar to enjoy a drink and of course the pizza he was so crazy about.

So imagine Rosemont’s surprise one day when he was over at a friend’s house and she brought out the piping hot pizza that looked exactly like the one from his local dive bar.

“But where did you get this?”

“Get this? I made it.”

“You made this?”

“Well that’s a bit of a stretch, but I did re-heat it?”

“Oh, did you get it from a bar?”

“A bar? Heavens no, I got it from the freezer.”

“What do you mean you got it from the freezer.”

“Here, let me show you.”

And with that Rosemont was led into the kitchen and shown the empty box of Dr. Oetker, “Ristorante Pizza Pepperoni” still lying on the kitchen counter.

Rosemont stood there staring at the box slack-jawed.

For years the pizza that he had been raving about and which he thought was fresh, homemade pizza (to be fair nobody at the bar had ever said that) was from the freezer section at his local Kroger.

How could he not have noticed?

Because a pizza without its box, looks just like a pizza.

The same way a company’s balance sheet without any Bitcoin, looks just like any other balance sheet.

Or does it?

Bitcoin Beneath the Sheets

Over the past year, pressure has risen for corporate CFOs and finance executives to if not find ways for their firms to acquire Bitcoin, at least make an inquiry to see if that was possible.

And in a Gartner Survey conducted last month, a full 5% of finance executives and CFOs surveyed said that they intended to acquire Bitcoin for their companies before the end of the year.

But a survey is just that, a survey, it’s what companies actually do that speaks volume.

Your actions speak so loud I can’t hear you.

Because unbeknownst to most shareholders, companies, in particular listed firms, have been accumulating Bitcoin under the radar and in ways that wouldn’t attract regulatory scrutiny or require regulatory filings.

Using a complex web of offshore holding companies and trusts the stuff of the Panama Papers, these firms are so concerned about revealing to their shareholders that they’re holding Bitcoin that they’re using the same web of corporate shell companies that make it virtually impossible to determine who the ultimate beneficial owner of that Bitcoin is.

Making matters worse, because Bitcoin is pseudonymous, even if anyone suspected a company of holding Bitcoin, trying to use the blockchain to pin down any specific address to a particular firm is almost impossible.

With most of these companies buying Bitcoin to hold it as a hedge against inflation and potential debasement of fiat currencies, movements in and out of the cold wallets where they store their Bitcoin is rare, making it even more difficult to determine which are the wallet addresses controlled by any specific company.

And the arrangers of these Bitcoin sales are careful to ensure that a sufficient provenance and enough transaction noise is present to make it difficult to tie a string of addresses to any specific company.

But why the need for subterfuge?

Closet Cryptocurrency Cult

Part of the reason of course is concerns over the perception of investors.

It would be one thing if Bitcoin had a decades’ long institutional investing track record, but quite another if it ultimately devalues to zero (it won’t).

And given the nascent state of Bitcoin and cryptocurrencies, not every company CEO, particularly those who are salaried and not founders, are willing to stick their necks out and declare that they’ve bought Bitcoin for their firms.

Ultimately these employee-CEOs have to tread a fine line.

Declare that their companies have Bitcoin on the balance sheet and risk shares of the firm riding along with Bitcoin’s volatility, distracting investors from the business case of the company, and drawing unnecessary focus to a firm’s balance sheet.

But don’t buy any Bitcoin and risk being fired when five years down the road the board of directors hauls in the CEO and CFO and asks them why they didn’t buy Bitcoin when they had the chance.

Caught between a rock and a hard place, company executives are having to tread a fine line between buying Bitcoin and not buying Bitcoin.

And for those companies which decide to go in, most have settled at a 1% to 5% of their assets on the cryptocurrency.

And while all that is fine and dandy, how do these firms actually go about acquiring the Bitcoin and how do they account for it on their balance sheets?

By using the same tricks of obfuscation that some of the biggest companies in the world use to manage their tax exposure.

A Web of Shells

Using a string of holding companies, some of the biggest firms in the U.S. and around the world are slowly buying up Bitcoin to bolster their balance sheets away from the public eye.

And the web of companies that are holding that Bitcoin appear as single-line entries in accounting statements, with no real way to prove the value of those holdings, all in the name of discretion for their ultimate beneficial owners.

Offshore entities and trusts own other offshore entities and trusts in a convoluted web of holdings that make it almost impossible to determine who owns what and how much what is owned is valued at.

And even though it’s been five years since the Panama Papers were leaked, many of the same shady activities that offshore firms whose beneficial owners are hard to determine are still being used, only this time to hold Bitcoin off corporate balance sheets.

Part of the problem of course is that big corporate purchases of Bitcoin can also have an outsized impact on the price of Bitcoin, especially since liquidity for Bitcoin has been progressively declining, with more institutional investors getting involved in the space.

Right up till the last week of February, data from Glassnode, a blockchain analytics firm, suggested that the amount of Bitcoin held in exchange addresses had declined by 6.6%.

And while there are specialist shops, of the sort that cater to high profile Bitcoin purchases by MicroStrategy and Tesla, to ensure minimal slippage in executing buy orders, there are also others who specialize in what’s called “smurfing.”

By making small regular automated “buy” orders for Bitcoin throughout the course of the day, companies can acquire more Bitcoin without necessarily pushing up prices and while keeping flows low so as to avoid unnecessary attention.

There may yet come a day, when Bitcoin can be spoken of in polite company and at black tie events as a hallmark of respectability.

And when that day of deliverance should come, you can be sure that the parade of CFOs and CEOs will be rushing to stand behind the mic to declare their prescience in helping shore up their corporate balance sheets by making such timely investments in Bitcoin.

For now however, many of these investments will never see the light of day or mentioned (not even in hushed whispers) at company general meetings.

The Capital

A publishing platform for professionals now available on https://thecapital.io

Sign up for Try The Capital Platform at thecapital.io

By The Capital

Head over to https://thecapital.io, sign up and publish your first article today! Take a look.

By signing up, you will create a Medium account if you don’t already have one. Review our Privacy Policy for more information about our privacy practices.

Check your inbox
Medium sent you an email at to complete your subscription.

Patrick Tan

Written by

CEO of Novum Alpha, an all-weather digital asset trading firm that uses Deep Learning tools to deliver dollar-returns in all market conditions.

The Capital

A publishing platform for professionals in business, finance, and tech

Patrick Tan

Written by

CEO of Novum Alpha, an all-weather digital asset trading firm that uses Deep Learning tools to deliver dollar-returns in all market conditions.

The Capital

A publishing platform for professionals in business, finance, and tech

Medium is an open platform where 170 million readers come to find insightful and dynamic thinking. Here, expert and undiscovered voices alike dive into the heart of any topic and bring new ideas to the surface. Learn more

Follow the writers, publications, and topics that matter to you, and you’ll see them on your homepage and in your inbox. Explore

If you have a story to tell, knowledge to share, or a perspective to offer — welcome home. It’s easy and free to post your thinking on any topic. Write on Medium

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store