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With unprecedented interest in the digital asset market by investors and market participants and a favorable regulatory landscape as further described in our previous alert, many public companies are developing strategies to hold digital assets such as bitcoin or other cryptocurrencies on their balance sheets for operations or as reserve assets. These companies have come to be known as DATCOs, particularly those with a core strategy of investing in digital assets. Some of these companies acquire digital assets by raising capital through a variety of transactions including public equity offerings, private investments in public equity (PIPEs) or convertible note offerings. There has also been a rise in companies entering into reverse merger transactions with special purpose acquisition companies (SPACs), so-called de-SPAC mergers, to become public companies that exclusively hold digital assets as their business strategy.
According to a recent Forbes article, at least 228 public companies worldwide have announced digital asset treasury strategies to hold approximately $148 billion of bitcoin and other cryptocurrencies as of October 2025. A company's rationale for holding these digital assets may be to facilitate and settle transactions more efficiently, mitigate exposure to currency risks and inflation in the traditional finance markets, provide new sources of liquidity and financing for operations, attract younger tech-savvy investors, capitalize on attractive financial returns, or to emerge as a technological leader in its industry. Additionally, the commitment of the current presidential administration and the Securities and Exchange Commission (SEC) to foster innovation and facilitate trading of digital assets in the United States has only bolstered public companies' efforts to hold such assets.
Although investments in the digital asset market present unique opportunities for innovation and revenue creation for public companies, boards of directors and management teams must also assess the risks and complexities of developing a digital asset treasury strategy. As a result, the following are a few key questions that boards of directors and management teams of public companies should consider when evaluating the potential impact of holding digital assets:
Business Strategy and Risk Management:Does holding digital assets align with the company's business strategy, values, and philosophy on risk management?
Purpose and Policies: Has the company adopted a policy or investment plan which (a) articulates a clear rationale for holding digital assets and (b) provides parameters for (i) the types and amounts of the digital assets held and (ii) the process of acquiring, maintaining custody of and disposing of such assets?
Classification of Digital Assets:Given the regulatory uncertainty in the digital asset market, is the company investing in digital assets that could be considered securities and trigger additional obligations such as stockholder approvals and registration, or implicate the Investment Company Act of 1940?
Custodians and Other Experts:Does the company have the expertise in-house to hold, manage, and account for digital assets, or does it need to retain asset managers, custodians, and other experts? Does the company have the right advisors, including an audit firm with expertise in accounting for digital assets?
Controls and Procedures:Does the company have and maintain robust and effective controls and procedures to mitigate risks such as counterparty risks, theft, hacking, and loss of custody and control of digital assets?
Public Disclosure: Is the company prepared to disclose in its financial statements and public filings the material impact of digital assets on its business, financial condition, results of operation, and risk profile? Similarly, is the company prepared to answer such questions related to the holding of digital assets from investors, analysts, and other stakeholders?
Based on statements from the SEC and comment letters, companies with a digital asset treasury strategy should (a) disclose the assets that are part of the strategy; (b) provide a complete description of the strategy; (c) disclose how the strategy will be financed; (d) discuss the policies for acquiring, holding and selling the digital assets; (e) discuss how the strategy impacts existing operations; (f) disclose material custody arrangements; and (g) disclose risks associated with the strategy.
Board Fiduciary Duties and Oversight: Is the board of directors receiving sufficient information on the digital asset market, given its regulatory uncertainty as well as its volatility, in a manner to ensure that the board can fulfill its fiduciary duties?
Key Takeaways
As public companies continue to explore whether to integrate digital assets into their treasury strategies or make investments in digital assets their core strategy, boards of directors and management teams will play a crucial role in ensuring that the companies adhere to sound corporate governance practices, properly mitigate risks and align decision making with the company's overall business strategy and goals and make appropriate public disclosures. By addressing these questions and others, boards of directors and management teams will be better equipped to navigate and implement a digital asset treasury strategy. It is also important to be prepared that the current favorable regulatory tides for digital assets may change, and such a change may warrant a shift in strategy in the future.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
