On Thursday (October 8), Jack Dorsey’s FinTech firm Square released a document titled “Square, Inc. Bitcoin Investment Whitepaper” shortly after disclosing that it had made a $50 million investment in Bitcoin.
Square was founded in February 2009, i.e. it is 11 years old, just like Bitcoin (BTC). The three co-founders are Jack Dorsey (who is also the company’s Chairman and CEO), Jim McKelvey, and Tristan O’Tierney.
Earlier today, the official account of Square’s Investor Relations team sent out the following tweet to disclose the company’s recent investment in Bitcoin:
According to Square’s press release, the Californian firm had “purchased approximately 4,709 bitcoins at an aggregate purchase price of $50 million.”
This move delighted the cypto community. For example, here is the reaction from Messari researcher Ryan Watkins:
Prominent Dutch crypto analyst/trader Michaël van de Poppe finds the decision by institutional investors MicroStrategy and Square to convert some of their dollar holdings to Bitcoin very bullish long term:
Anyway, shortly after the aforementioned announcement came out, Square released an open source document titled “Square, Inc. Bitcoin Investment Whitepaper” in order to “clearly articulate the process behind the execution” of this purchase to help other companies that might also be considering allocating part of their reserves to Bitcoin.
This document started by saying that “given the rapid evolution of cryptocurrency and unprecedented uncertainty from a macroeconomic and currency regime perspective,” Square had decided to expand its “largely USD-denominated balance sheet and make a meaningful investment in bitcoin.”
It then went to address four important aspects of the process it had gone through.
“To maintain transaction privacy and price slippage on execution, Treasury purchased the bitcoin
over-the-counter with a bitcoin liquidity provider that we currently use as part of Cash App’s
bitcoin trading product.
“We negotiated a spread on top of a public bitcoin index and executed trades using a Time-Weighted Average Price (TWAP) over a predetermined 24-hour period with low expected price volatility and high market liquidity, in order to reduce risks associated with cost and pricing.”
“As part of Cash App’s launch into enabling customers to buy and sell bitcoin, we invested heavily
in building out our cryptocurrency infrastructure to help protect our customers’ funds…
“Since launching bitcoin support, we have developed a robust approach to bitcoin cold storage, and we recognize the importance of sharing our work with the community. As a result, we’ve open-sourced documentation, code, and tools for ‘Subzero‘, our Hardware Security Module-backed solution for protecting Square’s bitcoin holdings.”
“Although this investment is held in cold storage, in order to further protect our bitcoin holdings Square maintains a Crime insurance policy to protect against internal or external theft of bitcoin both in hot wallet and cold storage.”
“According to AICPA’s ‘Accounting for and auditing of digital assets‘, because crypto assets lack physical form, they meet the definition of intangible assets and would be accounted for under FASB ASC 350, Intangibles — Goodwill and Other. Since there is no limit on their useful lives, cryptocurrencies are therefore classified as indefinite-lived intangible assets.”
The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.