The Digital Asset Primer: Corporate Treasury Moves From HODL to Yield

For much of the early cryptocurrency era, corporate and institutional players viewed digital assets primarily as a hedge or speculative bet.

If treasury teams and chief financial officers thought of crypto at all, they tended to view the on-chain economy as full of uncorrelated assets in an unpredictable macroeconomic landscape.

The classic approach, as popularized by firms like MicroStrategy, now doing business as Strategy, and Block, was to buy bitcoin or another top digital asset, hold it on the balance sheet, and wait.

As recently as Wednesday (April 23), that approach was still being popularized across the marketplace, as evidenced by a new company formed by Cantor Fitzgerald, Tether Holdings SA, and SoftBank Group, Twenty One Capital, which aims to become one of the largest public holders of bitcoin by deploying billions of dollars to stockpile the nominal digital asset.

The entity will launch with over 42,000 bitcoin (valued at about $3.6 billion), positioning it as the third-largest corporate bitcoin holder globally.

Elsewhere, on Monday (April 21), CPG brand Upexi said it is raising $100 million and plans to use most of the capital to accumulate the cryptocurrency Solana for its treasury operations.

What do these crypto strategies mean for the enterprise? And are treasury leaders now looking beyond bitcoin, toward a broader crypto asset universe?

With the maturation of decentralized finance (DeFi) protocols and custodial yield products, a passive approach is no longer the only option. Treasury teams, always under pressure to optimize capital, are asking a fundamental question: If we hold digital assets, can we earn a yield on them, and safely?

Read also: The Digital Asset Primer: On-Chain Tokenization for Payments Professionals

A host of firms are partnering to launch a digital real-time settlement network called Lynq, which is powered by a tokenized treasury fund, the Arca Institutional U.S. Treasury Fund (TFND), which issues shares as digital asset securities.

The Lynq network will offer yield for its “institutional clients,” including banks, hedge funds, investment advisors and similar organizations that invest on behalf of others. U.S. Bank will serve as Lynq’s qualified cash custodian and treasury management services provider.

What does yield mean in a world where traditional capital markets and the digital asset ecosystem can offer it?

In the simplest sense, farming yield for enterprise reasons involves actively putting digital assets to work through yield-bearing instruments, such as staking, lending and liquidity pools. The digital asset space is rife with innovation, including structured products, tokenized bonds and actively managed crypto strategies that mimic familiar Wall Street approaches but are executed on-chain.

For example, in proof-of-stake (PoS) blockchain networks, holders can “stake” their assets to help secure the network, earning rewards (usually paid in the native token). For CFOs, staking offers a yield-generating mechanism somewhat akin to a dividend, albeit with technical, liquidity and regulatory considerations.

Crypto lending platforms, for their part, can enable asset holders to lend their tokens in exchange for interest payments. This helps allow treasuries to deploy idle crypto assets and earn returns, similar to money-market strategies in traditional finance.

By supplying their digital assets to decentralized exchanges or automated market makers (AMMs), corporate treasuries can earn fees from trading activity. While this method is potentially lucrative, it exposes providers to unique risks such as impermanent loss, a phenomenon where the value of supplied assets diverges from simply holding them.

See also: What Treasury Teams Can Learn From Central Banks’ Tokenization Projects

If the last decade was about recognizing crypto as an emerging asset class, the next is about mastering its strategic potential. Yield-bearing instruments and real-time settlement protocols are powerful tools, but they demand a new level of sophistication and vigilance from treasury professionals.

Early forays can often be experimental, such as small allocations that are carefully monitored. Over time, teams can expand exposure as comfort and infrastructure mature. Yet, as any finance chief knows, yield is rarely free. Each instrument comes with a unique mix of operational, regulatory and market risks.

Most crucially, rules and policy frameworks governing staking, lending and other crypto activities remain in flux, particularly in the United States, European Union and emerging markets. However, that regulatory uncertainty is starting to shift toward clarity, at least in the U.S.

As Dan Boyle, partner at Boies Schiller Flexner, told PYMNTS’ Karen Webster this week, crypto is not getting a get-out-of-jail-free card — a nod to the end of the industry’s regulatory gray area and the beginning of its era of accountability.

“There’s some strategic value to being a world leader in digital assets … If my competitor is issuing a stablecoin or tokenizing assets, am I missing out if I don’t?” Boyle said.

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