Gavin Green on Nostr: What is a Bitcoin Strategic Reserve and how to get started. What is a Bitcoin ...
What is a Bitcoin Strategic Reserve and how to get started.
What is a Bitcoin Strategic Reserve? I'm so glad you asked. This is just a fancy way of saying you have some savings in Bitcoin. In the case of an individual person this would be the same as a savings account, except in bitcoin. In the case of a company this sort of savings would be called a treasury. Company treasuries don't come up in conversation too often simply because most companies can’t leave cash just lying around in case of an emergency. Inflation eats away dormant cash like a melting ice cube. Reference previous article for more details. The profit predicament.
As more and more businesses start to look at a Bitcoin Strategic Reserve (BSR) it’s worth discussing some ideas around this. There are a few ways for this to be done:
Firstly, the SBR is a reserve. It’s not working capital, and it’s not short term investing. It’s capital that can be stored for at least 5 years without disrupting company liquidity.
Now how do you actually go about creating one? Let’s look at two options.
1. Buy Bitcoin with retained earnings and store it, or
2. Get paid in Bitcoin and store that as your strategic reserve.
Option One:
This option involves the company opening an account with a registered Bitcoin exchange. Be prepared for some serious admin jumping through all the KYC hoops – exchanges are financial service providers after all. Deposits funds to the exchange account, and then buy Bitcoin. The exchange typically charges between 1% and 2% per transaction, but make sure to check the ‘fees’ page on your chosen exchange. Fees are different for each type of transaction. An eft payment from your company bank account to your exchange account is the cheapest but you do have to wait the usual 2-3 days for the fund to clear. You can use quicker payment options but fees tend to be higher for the convenience.
Option Two:
A much more interesting option is getting your clients to pay you in bitcoin. This way you can get bitcoin without having to open an exchange account and go through the troublesome KYC process with multiple verifications and emails forwards and backwards. You also avoid the exchange transaction fees but, more importantly, you also avoid the merchant fees for credit card transactions.
Merchant accounts for businesses charge between 2.2% and 3.5% per transaction this means for every R100 your client pays by credit card you pay R2.20 – R3.50 to the bank for the favour. Of course, there is also an initiation fee the bank charges for the hardware and setting this up and there can be a monthly admin fee that you are required to pay to continue the service. There is an increasing number of third-party companies providing the similar solutions but the fees are pretty much similar to traditional banks.
https://www.news24.com/news24/bi-archive/card-online-payments-south-africa-2021-6
Something else to think about with credit card payments is that you don't actually receive the money immediately. Yes, the transaction shows as approved when the credit card is swiped and your customer takes his product or service, but the funds only arrive in your account days later. This means that not only do you pay a transaction fee but you're also going to spend up to a week waiting for your money.
For the sake of simple math let's use 5% as the cost of taking money you have earned from your business to purchase Bitcoin (3% merchant fees and 2% exchange fees). Now imagine if your client paid you in Bitcoin. This means you now get the Bitcoin at a 5% discount and the Bitcoin is stored directly to your account.
Business owners sometimes say that they cannot afford to lose out on rands and that they need every penny to meet their expenses. The reality is you are not going to be converting all your sales from rands to bitcoin overnight. You will only have a very low percentage of people using Bitcoin to buy your products and services, at least for the moment. Pick ‘n Pay stores have been early bitcoin payment adopters and even with their national footprint of groceries (cheap daily necessities) they only received 0.34% of their annual turnover in bitcoin.
https://www.itweb.co.za/article/pick-n-pay-sees-uptick-in-bitcoin-payments-in-stores/DZQ58vV8kL1MzXy2
https://www.picknpayinvestor.co.za/pdf/investor-centre/results-and-presentations/2024/interim-results-2024/pnp-h1-fy25-interim-results-booklet-singles.pdf
The fees that you are paying on credit card transactions are going to amount to far more than what you would miss by being paid in bitcoin with a near zero transaction fee. This is also a convenient savings tool as the bitcoin that comes in gets stored and left there. It's a small percentage you probably won't even really notice it and yet it's just going to add up week by week, month by month until you have a really significant portion. Think of this as a forced savings account.
You can even afford to incentivise clients to pay in bitcoin by offering a discount.
Another benefit is that by offering or by accepting bitcoin payments can sell to customers outside of South Africa, that would normally have difficulties sending you cross border payments via traditional means.
Speak to us for more information.
https://bitcoinforbusiness.io/what-is-a-bitcoin-strategic-reserve/
What is a Bitcoin Strategic Reserve? I'm so glad you asked. This is just a fancy way of saying you have some savings in Bitcoin. In the case of an individual person this would be the same as a savings account, except in bitcoin. In the case of a company this sort of savings would be called a treasury. Company treasuries don't come up in conversation too often simply because most companies can’t leave cash just lying around in case of an emergency. Inflation eats away dormant cash like a melting ice cube. Reference previous article for more details. The profit predicament.
As more and more businesses start to look at a Bitcoin Strategic Reserve (BSR) it’s worth discussing some ideas around this. There are a few ways for this to be done:
Firstly, the SBR is a reserve. It’s not working capital, and it’s not short term investing. It’s capital that can be stored for at least 5 years without disrupting company liquidity.
Now how do you actually go about creating one? Let’s look at two options.
1. Buy Bitcoin with retained earnings and store it, or
2. Get paid in Bitcoin and store that as your strategic reserve.
Option One:
This option involves the company opening an account with a registered Bitcoin exchange. Be prepared for some serious admin jumping through all the KYC hoops – exchanges are financial service providers after all. Deposits funds to the exchange account, and then buy Bitcoin. The exchange typically charges between 1% and 2% per transaction, but make sure to check the ‘fees’ page on your chosen exchange. Fees are different for each type of transaction. An eft payment from your company bank account to your exchange account is the cheapest but you do have to wait the usual 2-3 days for the fund to clear. You can use quicker payment options but fees tend to be higher for the convenience.
Option Two:
A much more interesting option is getting your clients to pay you in bitcoin. This way you can get bitcoin without having to open an exchange account and go through the troublesome KYC process with multiple verifications and emails forwards and backwards. You also avoid the exchange transaction fees but, more importantly, you also avoid the merchant fees for credit card transactions.
Merchant accounts for businesses charge between 2.2% and 3.5% per transaction this means for every R100 your client pays by credit card you pay R2.20 – R3.50 to the bank for the favour. Of course, there is also an initiation fee the bank charges for the hardware and setting this up and there can be a monthly admin fee that you are required to pay to continue the service. There is an increasing number of third-party companies providing the similar solutions but the fees are pretty much similar to traditional banks.
https://www.news24.com/news24/bi-archive/card-online-payments-south-africa-2021-6
Something else to think about with credit card payments is that you don't actually receive the money immediately. Yes, the transaction shows as approved when the credit card is swiped and your customer takes his product or service, but the funds only arrive in your account days later. This means that not only do you pay a transaction fee but you're also going to spend up to a week waiting for your money.
For the sake of simple math let's use 5% as the cost of taking money you have earned from your business to purchase Bitcoin (3% merchant fees and 2% exchange fees). Now imagine if your client paid you in Bitcoin. This means you now get the Bitcoin at a 5% discount and the Bitcoin is stored directly to your account.
Business owners sometimes say that they cannot afford to lose out on rands and that they need every penny to meet their expenses. The reality is you are not going to be converting all your sales from rands to bitcoin overnight. You will only have a very low percentage of people using Bitcoin to buy your products and services, at least for the moment. Pick ‘n Pay stores have been early bitcoin payment adopters and even with their national footprint of groceries (cheap daily necessities) they only received 0.34% of their annual turnover in bitcoin.
https://www.itweb.co.za/article/pick-n-pay-sees-uptick-in-bitcoin-payments-in-stores/DZQ58vV8kL1MzXy2
https://www.picknpayinvestor.co.za/pdf/investor-centre/results-and-presentations/2024/interim-results-2024/pnp-h1-fy25-interim-results-booklet-singles.pdf
The fees that you are paying on credit card transactions are going to amount to far more than what you would miss by being paid in bitcoin with a near zero transaction fee. This is also a convenient savings tool as the bitcoin that comes in gets stored and left there. It's a small percentage you probably won't even really notice it and yet it's just going to add up week by week, month by month until you have a really significant portion. Think of this as a forced savings account.
You can even afford to incentivise clients to pay in bitcoin by offering a discount.
Another benefit is that by offering or by accepting bitcoin payments can sell to customers outside of South Africa, that would normally have difficulties sending you cross border payments via traditional means.
Speak to us for more information.
https://bitcoinforbusiness.io/what-is-a-bitcoin-strategic-reserve/