Why Bitcoin Treasury Companies will be forced to buy ETFs instead of Spot Bitcoin
The revealed-preference endpoint is paper BTC as the corporate standard — observable, steerable, and revocable.
Executive Thesis
Given low Gross Consent Product politics (scarce consent), the Controllers won’t outlaw corporate self-custody for Treasuries; they’ll price and operationalize it out.
Outcome: corporate BTC exposure migrates to supervised wrappers (ETFs/notes/TRS) through accounting optics, collateral eligibility, ratings, Prime Broker/legal plumbing, and app-store/bank/cloud policies. Hybrid overlay (legacy spot stays; most incremental exposure via wrappers/derivatives) is the path of least resistance.
My base case by end-2027 (US/EU corporates with public audits):
Wrappers (ETF/notes/TRS): 40–55% of corporate BTC exposure
Direct spot, true self-custody: 40–50% (legacy spot holders, ideological outliers, miners, lightly regulated)
On-exchange custodial (not ETF): 0–10% (shrinking)
I’ve already written a couple of articles on Bitcoin treasury companies if you need more context:
Why Wrappers Beat Spot (Control + Corporate Incentives)
Observability: one subpoena to sponsor/custodian/Authorized Participants vs 10,000 wallets and opaque key ceremonies.
Revocability: units can be frozen/redeemed/blacklisted; coins in cold storage cannot.
Pledgeability: ETF shares are clean collateral at Prime Brokers; spot is “nonstandard collateral”.
Operational risk outsourcing: no keys, no Health and Safety Management System (HSMs), no SOC-2 audits, no key-person risk.
Narrative cover: “investor protection” + “audit clarity” lets IR/boards defend exposure without reputational self-immolation.
Benchmark plumbing: ETFs can be indexed or sitter-eligible in treasury policies; spot can’t.
The Levers That Do the Steering (concrete, ranked by bite)
1) Accounting & Audit (optics)
2025 fair-value (US GAAP) reduces impairment theater for spot — but does not remove the internal-controls lift (key management, segregation of duties, disaster recovery, auditor testing).
Big-4 auditors will flag self-custody as a material control risk unless enterprise-grade custody + policies are proven.
Net: ETFs still look “audit-easy”; spot remains “control-heavy”.
2) Collateral & Haircuts (financing convenience)
PB/ISDA/CSA “eligible collateral” lists can whitelist exchange-traded instruments while classifying spot BTC as “ineligible/other — haircut 50–100%”.
Treasury desks needing lines or Total Return Swap (TRS) will prefer ETFs they can pledge at standard haircuts.
3) Capital, Ratings & Insurability
Insurers/pensions apply punitive capital to raw BTC; ratings methods label self-custody “operational/reputational risk”.
Cyber/Crime insurance limits for hot/cold storage remain restrictive/expensive.
Boards optimize optics → wrappers win.
4) Banking/Custody/Cloud Perimeter
Banks welcome ETF custody; decline or overprice raw-coin custody.
MDM/App-store/Cloud Acceptable Use Policies make enterprise wallet software a governance headache; fintech controllers will push managed custody.
5) Tax & Fee Engineering
Sponsors run fee holidays; tax/reporting simplifications for ETFs vs bespoke withholding/backup-withholding quirks on spot flows.
Cross-border treatment is dramatically simpler with listed product.
6) Index & Benchmark Inclusion
Committee admits BTC ETFs to style/sector sleeves or policy benchmarks; treasuries hug benchmarks to avoid TE violations.
7) Disclosure/ESG/Reputational Filters
Boilerplate lets IR call ETF risk “market risk”; raw BTC invites AML/KYC/ESG questioning and activist noise.
Most Probable Migration Path (how it creeps in)
Carrots: near-zero ETF fees, sponsor marketing, “clarity” speeches; Prime Brokers offer Total Return Swap (TRS)/financing against ETF units.
Soft fences: audit/control guidance raises the bar for corporate self-custody; banks discourage spot collateral; insurers load pricing.
Policy nudges: ERISA/insurer circulars prefer “exchange-traded crypto exposure”; app-store/MDM tighten enterprise wallet policies.
Normalization: sell-side models assume ETF-only; board templates copy peers; new exposure routes to wrappers by default.
Hard fences (only if needed): explicit “exchange-traded only” language in common CSAs/mandates.
CFO Decision Tree (operational reality)
Need financing/pledgeability? → ETF/TRS
Auditor comfort & clean footnotes? → ETF
Reputational/ESG quiet life? → ETF
Ideological/sovereignty goal + no leverage need + willing to build controls? → Spot (outlier)
Existing spot with big embedded gains? → Hold legacy; add via ETF (avoid realization).
Net: hybrid overlay becomes default: legacy spot left untouched; most incremental via wrappers.
Edge Cases That Keep Some Spot Alive
Miners (natural inventory) with bespoke custody.
Founder-led ideologues in lax jurisdictions.
Sovereign-adjacent entities using raw coins for optionality (won’t telegraph).
Tight banking circles where a single custodian/auditor signs off turnkey self-custody.
Market-Structure Consequences
Paperization Ratio (PR) ↑ → realized vol ↓, basis/carry depth ↑, upside blow-offs capped (creation/algo supply + dealer hedging).
Ownership concentration at sponsors/Authorized Participants/custodians; policy levers gain torque.
Event dynamics: “regulatory clarity” headlines produce ETF-led pops; policy scares trigger orderly draw-downs (less disorderly spot liquidations).
What Would Actually Change This View (low probability)
Safe-harbor laws for corporate self-custody + standardized audit & insurance frameworks.
Spot eligible collateral at multiple bulge-bracket Prime Brokers with normal haircuts.
Ratings methodology treating self-custody as neutral.
Major sovereign openly adopting direct spot and forcing bank policy around it.
Monitoring Dashboard (so you don’t guess)
10-K/20-F language: watch treasury policy updates (from “digital assets” to “exchange-traded instruments”).
Prime Broker term sheets/CSAs: look for ETF-only eligibility clauses.
Auditor letters: control deficiency wording on keys/segregation.
Insurance binders: pricing/limits for crypto crime/cyber on hot/cold storage.
Index committee minutes: ETF inclusions.
Sponsor fee moves: temporary fee cuts to win corporate flows.
App-store/MDM Acceptable Use Policies: enterprise wallet distribution friction.
ETF holdings/flows: PR trend; Authorized Participant activity spikes around policy events.
Investor Alpha (what to do with this)
1) Trade the Paperization Regime
When Paperization Ratio ↑ and Net Liquidity steady → harvest carry (covered calls on BTC ETFs), basis trades for pros.
Buy fear dips on “self-custody crackdown” rumor cycles; sell/overwrite into “clarity” PR ramps, keep self-custody core.
2) Own the Compliance Consoles (regardless of wrapper share)
Palantir (admissible lineage/rollback/consent proofs; crisis deployment muscle).
Microsoft (Entra/Compliance/Purview; Gov cloud default; device/identity surface).
3) Keep a Sovereign Sliver (personal, not corporate)
Self-custody for tail convexity (capital-control/Great-Taking style).
Treat corporate flow as price dampener, not sovereignty backstop.
TL;DR
Base path: hybrid overlay — legacy spot sits; most new corporate exposure migrates to wrappers because pledgeability, audit, financing, optics, and benchmark plumbing beat ideals.
No big-bang spot sales unless forced by governance/tax; rotation is incremental via new dollars and refinancing convenience.
None of this should be considered investment advice.