Bitcoin on the Balance Sheet: What Owners Should Know Before Deciding

Why are mid-sized companies asking whether bitcoin belongs on the balance sheet?

There is money in the business account that is not needed right now. Interest is modest, inflation eats away at purchasing power, and the newspaper reports that a company has moved billions with bitcoin. Then someone at the shareholders' meeting asks the question: should we do that too?

The debate was triggered by the US software company MicroStrategy, which has called itself Strategy since 2025. In August 2020, according to publicly available information, it bought around 21,000 bitcoin for roughly 250 million US dollars for the first time and has greatly expanded its holdings since then through share and bond issues. Other listed companies have followed the pattern.

This piece asks: under what conditions can bitcoin be considered as a reserve for an owner-managed business at all? To answer it, we first compare the cash position of a mid-sized company with that of a listed corporation, then examine liquidity, accounting, and custody, and end with typical mistakes and a five-point resolution. The article does not tell you whether to buy, and it says nothing about future prices.

What makes your treasury different from a listed corporation's?

The role model is of limited use. A listed company that makes bitcoin the core of its strategy plays by different rules than a GmbH, a German limited liability company, with 40 employees.

The most important difference is access to fresh money. A company that can refinance on the capital market gets through a price slump more easily. A business that pays wages, suppliers, and taxes out of its cash does not have that option.

How much volatility can your liquidity withstand?

The first question is not about the price. It is this: what amount can you leave untouched for several years, even if it loses half or more of its value along the way? In bitcoin's price history there have been several declines of more than half from the previous peak. Anyone forced to sell in such a phase, because a tax bill or a bad debt gets in the way, turns a paper loss into a real one.

The three-pot rule

Before you talk about types of investment, mentally divide your liquid funds into three pots:

1. Operating cash: everything you need over the next three months for wages, suppliers, rent, taxes, and loan repayments.
2. Safety reserve: the buffer for what can go wrong, such as a major customer defaulting or a machine breaking down. There is no fixed size for this. Many businesses use several months of fixed costs as a guide.
3. Free surplus: money the business will need neither for day-to-day operations nor for planned investments in the foreseeable future.

Only the third pot is even a candidate for volatile investments. In many businesses it is smaller than the account balance on a good day suggests.

A second worked example shows the effect on runway. A business has 600,000 euros in liquid funds and 150,000 euros in monthly fixed costs. Without bitcoin, the money lasts four months.

How is bitcoin accounted for? German GAAP, IFRS, and US GAAP at a glance

On the balance sheet, bitcoin is not money. Neither the German Commercial Code (HGB), which sets out German GAAP, nor the international IFRS standards contain specific rules for cryptocurrencies. The classification follows from general rules and the professional literature. The overview below reflects the prevailing view and does not replace an assessment of the individual case.

The lower-of-cost-or-market principle requires an asset to be carried at no more than its acquisition cost and at a lower figure if its value has fallen. For a GmbH reporting under the HGB, this creates a lopsided picture: a price slump at the balance sheet date reduces reported earnings, while a rise above the purchase price remains invisible until sale. Your bank therefore reads the write-down in bad years and nothing in good years.

Since the change in the United States, companies there with large holdings report high profits in one quarter and high losses in the next, depending on the price. That explains some headlines but cannot be transferred to a set of German HGB accounts.

For tax purposes, too, business assets are subject to different rules than private investors. The one-year holding period familiar to private investors in Germany cannot simply be applied to a GmbH. On top of that come record-keeping duties for every purchase and sale. That is a topic for a conversation with your tax adviser before you buy, not afterwards.

Who holds the keys? Custody and regulation

Strictly speaking, owning bitcoin means owning a private key, a secret string of characters that allows you to dispose of the holdings. Whoever has the key has the money. Whoever loses it has nothing left. There is no bank that can recall a transfer.

In the EU, the Markets in Crypto-Assets Regulation, MiCA for short, has governed since the end of 2024 who may offer services relating to crypto assets. In Germany the financial regulator BaFin is responsible, and the national implementation is set out in the Crypto Markets Supervision Act. For you as a customer this mainly means: check whether a custodian or trading venue holds the required authorization. Authorization does not protect against price losses and is no seal of quality for the provider's business model either.

What mistakes do businesses make with bitcoin as a reserve?

Most problems are not caused by the price. They arise because the decision is made in passing and nobody thinks it through to the end.

• Mixing private and business: The owner is personally convinced and buys through the company. Co-owners, the bank, and the tax adviser find out from the annual accounts.
• Tapping operating cash: Money is invested that will be needed in three months for VAT or year-end bonuses.
• No exit plan: It is settled when to buy, but not at what loss or gain to sell and who decides.
• Custody as an afterthought: The access credentials sit with one person, on a private device, with no deputy.
• Involving bookkeeping too late: Receipts, prices at the time of purchase, and fees are missing and have to be reconstructed with great effort.

A company's cash has one job: staying solvent. Anything that puts that job at risk needs a resolution, not enthusiasm.

The five-point resolution: how to document the decision

For most companies, the treasury is no place for price risk. Anyone who, after weighing things up, still wants to commit a small part of the free surplus should make the decision as carefully as a major investment. One sheet of paper with five points, signed jointly by management and shareholders, is enough.

1. Purpose

   Write down in one sentence why the company should hold bitcoin and over what period. Explicitly separate the purpose from the owners' private investments.

2. Cap

   Set a fixed maximum amount in euros that comes from the free surplus. Work out what a total loss of that amount would mean for equity and the credit line.

3. Custody

   Choose one custody route, name two people with access, and record what happens in an emergency.

4. Accounting and tax

   Before buying, obtain a written assessment from your tax adviser on presentation, measurement, and record-keeping duties. Inform your bank if the position is material to the balance sheet.

5. Exit and review

   Define the conditions under which you sell, who triggers it, and when the resolution will next be reviewed, for example once a year.

First steps for this week

With or without bitcoin, the following steps improve your view of your own liquidity. They take two to three hours and are useful whatever the outcome.

• Divide liquid funds at month-end into the three pots: operating cash, safety reserve, free surplus.
• Add up monthly fixed costs and work out how many months the money lasts without new revenue.
• Check which larger payments are due in the next twelve months: taxes, loan repayments, investments.
• Clarify with your tax adviser how crypto assets would be presented and measured in your accounts.
• Check the articles of association and rules of procedure to see whether such an investment requires approval.
• If the topic is seriously on the table: fill in the five-point resolution as a draft and discuss it at the next shareholders' meeting.

The exercise often ends with the realization that the free surplus is smaller than expected. That is a good result too, because it answers the bitcoin question at the same time.

We started by asking under what conditions bitcoin can be considered as a reserve for an owner-managed business. The answer is narrow: only with money that is needed neither for day-to-day operations nor as a safety reserve, and only if the cap, custody, responsibility, and exit have been settled in writing beforehand. In addition, under German commercial law price losses are, according to the prevailing view, charged against earnings, while price gains only show up when the bitcoin is sold. The question of the free surplus is therefore usually more important than the question of the price.