Corporate Bitcoin in Europe: Regulation, Challenges & Opportunities

My name is Stefania. I have been in the Bitcoin space for ten years now. I sat on the board of a Bitcoin treasury company listed on the UK market. Joining me today is Scott from XCE, another Bitcoin treasury company in the UK, Carmen from Vanadi, a leading Spanish Bitcoin treasury company, and Khing from Treasury.

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I'm very proud to be here talking about Europe and the UK. There are some really interesting stories. Today we are going to go through what Scott, Carmen, and Khing have built, and show some of the opportunities with public listed companies in the UK, Europe, and Bitcoiners. Perhaps we can start with a short introduction. In about a minute each, say what you do and what your company does, so we can set the scene.

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Hi, guys. Scott Ellam, CEO and founder of XCE, Connecting Excellence Group. We are a publicly listed operating company with an integrated Bitcoin treasury. In 2021, as a private business, I decided to allocate our cash reserves and ongoing surplus cash to Bitcoin. Over the years, we designed a business around international executive recruitment, which is quite capital-light and very focused on people for revenue. Your headcount drives the growth.

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Over that period of time, as a private business accumulating Bitcoin, we engineered the PLC and Bitcoin treasury to be integrated in order to provide growth to the operating business as well. What I mean by that is we can now attract high revenue-generating talent and revenue-generating companies to the group as a result of the strength of our balance sheet and the active Bitcoin treasury. The stronger the operating business is, the more durable the Bitcoin treasury is. The stronger the Bitcoin treasury is, the more attractive the operating business is to recruitment consultants around the world and to privately owned recruitment companies that might consider joining the group in the future.

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Hello, everyone. I'm Carmen, director of investor relations at the first and only Bitcoin treasury in Spain. We've been accumulating Bitcoin for not even a year, and we are publicly listed as well. I'm very happy to join you on the stage. Thank you.

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Great to be here. I'm Khing Oei, founder and CEO of Treasury. We're in Amsterdam. We did a round last year of $150 million, backed by Nakamoto and the Winklevoss twins, to list in Amsterdam and become the first euro-denominated Bitcoin treasury company on a primary exchange in Amsterdam. We're excited to be here.

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Fantastic. So let's go straight to the point, because we are here in Las Vegas, right? I think it's really good to talk about Europe. Usually Europe and the UK are considered very slow and conservative, especially when it comes to technology and Bitcoin. But I think there are some really important opportunities that we should talk about. Khing, what can we learn from the U.S. to make a more durable and still attractive case for Bitcoin treasuries in Europe?

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The U.S. obviously has the deepest capital markets, and we've seen innovation with Strategy creating this new concept of a Bitcoin treasury company: a public company that holds Bitcoin and is able to grow and raise capital. That innovation is also very much in line with European capital structures and European infrastructure, and can really work.

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When I saw what was happening in the U.S. with Strategy and with Metaplanet in Japan replicating the model, it made total sense for us to do this in Europe in respected capital markets. That means being able to grow and offer easy access to investors, both retail and institutional, initially through equity but also through credit over time.

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One thing people in the U.S. often don't realize is that you have access to almost everything here, including Bitcoin ETFs, which we don't have in Europe. As a European citizen or resident, you cannot buy simple Bitcoin exposure in your brokerage account. That is a simple product-market fit to begin with.

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That's exactly what we were talking about. We really need to be creative as well. Scott, I want to ask you about Bitcoin. How do you create value as a Bitcoin treasury company? Obviously, mNAV has been compressed and the market has been challenging. Companies that don't have an operating business have been struggling a little bit, but you do have a business. How do you think about the Bitcoin treasury, and how do you align it with the business to create value for shareholders?

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I think the business has been modeled around providing a solution to a problem. All Bitcoin businesses, effectively, are providing a solution to a problem. The pure players are providing access. As Khing said, in the UK it is very difficult to access Bitcoin products within your tax wrappers. There is maybe 1.2 to 1.5 trillion pounds worth of pensions and ISAs in the UK with retail investors who struggle to gain exposure to Bitcoin. The initial pure players have solved that problem.

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Where we come into it at a later stage, and where we see this adding value, is solving the problem in our industry. Our industry is quite particular and unique in that there are thousands of recruitment company owners with cash-generating and profitable businesses, but competitors do not buy competitors. Private equity does not really come into the marketplace because, ultimately, the people are the business assets. They can either leave or join the business that is buying the business. So it rarely happens.

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The solution we wanted to put together, which investors can benefit from, is providing that exit ramp for privately owned recruitment companies that are cash-generating and holding cash reserves. Those owners tend to spend their entire careers in the business, only to self-fund a management buyout.

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We're looking to increase Bitcoin per share through acquisitions and through cash generation. We also have XCE Bitcoin bonds, which are Bitcoin-denominated bonds. We just completed an equity raise with Adam Back last week. We believe the challenge is helping Bitcoin treasury investors understand that this is a fully functional Bitcoin treasury with an ATM and bonds and can do all of that, but it is also an operating business whose EBITDA value grows as a result.

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In our industry, EBITDA for public companies is usually about six times. We look at the value as what is the EBITDA and what is the Bitcoin treasury mNAV. At the moment, we're trading at a 2.5 mNAV. We're at the start of this journey from last quarter, and I think everybody knows it probably was not the most euphoric environment over the last three months. But we've made some key hires and had some really good operational impetus, and we hope to carry that on.

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I think it is always good to come when the market is not in hype, because then you really need to have a strong foundation to make sure your company succeeds. I think it was a good time, honestly.

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If I tell a little story, the first time we bought a Bitcoin was October 2021. The price was $51,000. The next time we bought one, I think it was $61,000. The next time it was $30,000, then $20,000, then $16,000. We just bought daily and weekly throughout that period, and our revenues were going up at a 30% compound annual growth rate for four years.

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For us, we actually came out of it with more Bitcoin than we would have had if the price had carried on tracking up. That is where I see people-driven and asset-light businesses being able to really see Bitcoin as a solution. They have not quite seen it yet, and we want to educate the market on that.

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Carmen, I would really like you to share your story because you have a very important job, which is investor relations. Communicating with investors is not easy. I wanted you to share the challenges, how the process was, and what it actually takes to integrate a Bitcoin treasury strategy.

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I want you to picture the board meeting when Bitcoin actually comes in and we have Bitcoin on the agenda. The question starts to be: what is the cost of accumulating euros versus the cost of accumulating Bitcoin? We are talking about a fixed supply with Bitcoin and an unlimited one with the euro. After robust due diligence with our team, we decided to dive in.

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Obviously, it is a very different strategy than the one we had before, and especially in a country where we are leading that process. Being the first one is a massive job as well for the people who come behind us. At the end, we are shaping the framework in our country toward what a Bitcoin treasury can really become.

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For us, it was a strategy move, looking up to companies like Strategy here in the U.S., Treasury in Amsterdam, Capital B, and Scott in the UK. We see that the business model is already working in Europe. So the question was really: why not start accumulating Bitcoin now?

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Did you have to redo the entire shareholder base? Tell us a little bit about your relationships and what you are finding when you talk to investors. There is a strong investor community in Europe, maybe a little bit more traditional, but there is also a new generation of investors, younger people. Are they more interested in these business models?

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I feel like there are different kinds of investors. There are the ones who have curiosity, know the asset, and want to dive in. There are others who are more cautious and want to learn more. As you said, there are a lot of new generations coming in who actually bet on Bitcoin and have been in the market for quite long.

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When you are trying to draft these new conversations, it is really important to have the hard questions from the board, because they actually drive the stronger framework we are working with now.

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I guess there are a lot of young family offices as well. That is one of the things really driving Europe. Khing, talking about Bitcoin yield, because this is a big topic right now. Obviously, there are different ways to define Bitcoin yield, but it becomes a very important point because Bitcoin treasury companies are looking to generate some kind of revenue from Bitcoin. That is one of the things you are working on. How are you thinking about it?

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To start with the basics, traditionally yield is known as a return, an actual cash return. If you think about a bond, it yields a cash return. Strategy has redefined Bitcoin yield as Bitcoin per share growth, with Bitcoin per share itself being the main KPI. If, as a treasury company, you do not grow Bitcoin per share, then investors may say, why not buy Bitcoin spot or something else that keeps it the same?

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If Bitcoin doubles, that is great, but you still hold one Bitcoin. If you held the shares in a Bitcoin treasury company, you would have more after even a doubling. I think, as you said earlier, the market has changed quite a bit in the last year. Last year was a bit of a hype cycle, where any treasury company was trading at a big multiple to its NAV. In that environment, it is very easy to grow Bitcoin per share because you issue shares at a premium, which means you sell them expensive, and buying Bitcoin is immediately accretive.

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In this environment, you need to earn your premium. If you do not, you may trade below NAV. There are plenty of companies that trade below NAV. In that regard, it is important to actually generate some sort of return on your Bitcoin. There are two reasons. One is because it helps you grow your Bitcoin per share and your multiple. The other is that the big next innovation Strategy has done is issuing credit instruments, including instruments with fairly high coupons. In order to pay for that, it is very attractive if you generate an actual return, or yield, on your Bitcoin.

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How you do that can vary. One way is lending your Bitcoin. One is potentially staking it. There are different option strategies. We, as Treasury, are also a big proponent of different consolidation strategies to generate a return on that Bitcoin.

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There is an element of risk, but within the strategy you try to minimize that, right?

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Yes, that is a good point. You never lose your Bitcoin. Your task is safeguarding your Bitcoin. You need to define the right balance. The way we look at it is that there is an extremely high barrier for risk-adjusted returns, and principal protection is the key element. We would much rather make a low single-digit return with extremely low risk of touching that Bitcoin than a double-digit return with high risk.

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On Bitcoin per share, we are not yet at the stage where we have accumulated a sizable stack to consider all the bold conversations about the elements Khing was talking about. You have to measure the risk, the return, where the Bitcoin is going, and how it is secured.

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We are looking at it in a slightly different way. We are leveraging human capital to provide Bitcoin yield. Every raise we do increases Bitcoin, but we also increase revenue and profit because we become more attractive to the acquisitions we are considering. We also become more attractive to recruiters who say, I can join that business, that business, or XCE. In XCE, I get a similar basic salary, and if I generate half a million a year in billable income, I might make a similar amount of cash that year. But by spending my career in that business and generating half a million a year for the next ten years, I also earn performance-based equity, and I can see that the Bitcoin per share is increasing.

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It becomes very accretive to Bitcoin per share from our side, just doing what we would normally do, which is employ more billing consultants. For them, it is a kind of free option in their career as they look out over the next 10 or 20 years. I think that will become more and more attractive. It is about combining human capital with digital capital and creating a Bitcoin yield.

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It is very interesting because you have your own unique business model. I think that is what we are really doing in Europe. We are not trying to copy the U.S.; we are trying to come up with something that is unique.

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Now I want to ask you about Strategy. Strategy set up this and led the Bitcoin treasury model here in the U.S. They have a specific strategy. Do you think it makes sense for Europe to take their strategy and implement it in Europe? Or, when we think about credit, are there different opportunities that you see that could be unlocked?

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Absolutely. I think digital credit has become a very significant product now. Strategy has issued credit instruments, and people have spoken about it as a successful product, almost an iPhone moment. But for that to become a real asset class, which ultimately benefits all of us in this room, it will draw a lot more capital into Bitcoin.

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You need more issuers, more maturities, and more currencies so people can really trade the basis. I have been in the credit markets for a long time, and the moment you can actually get depth in that entire ecosystem, with a pension fund in Japan and a credit fund in Spain being able to trade with each other because they have different preferences, that is when it becomes a real market.

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All of us in the treasury space can contribute to that and make the system better by also being issuers of credit. I think that is the next phase we are going into. The long-term vision is that once you have that, you almost have Bitcoin-type banks going forward, where the Bitcoin company becomes the bridge between Bitcoin and the financial ecosystem.

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Carmen, talking about regulation, do you think the problem is regulation or is it actually education? What are the things that, if we move in the right direction, can really move the needle for our industry?

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In Europe, we are already working around the MiCA framework. I feel like regulation also protects the investor a lot, which is a very good thing to look at, while allowing other companies to keep innovating.

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It is very important to have financial education, not only about Bitcoin as an asset, but also about the stock markets, being there, and investing beyond what we used to invest in. The world is changing very fast, and so does finance. Bitcoin is a clear example of that.

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I feel like there is still a lot to do regarding the framework we work in. If all the treasury companies get together and push it a bit, we can make things happen, like everything that is happening here in the U.S. But of course, we have different tools. Europe is not even one single global thing; each country has different tools financially and investment-wise. We have to be well aware of that and how we can shape that toward all the competitors that are out there.

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The community of people coming to Bitcoin is increasing a lot. I remember when I was on the stage in Amsterdam just last year, it was impressive to see the people. It was a big event. There is more and more interest from retail investors, institutional investors, and traditional investors learning about the space. Khing, do you want to share how you are building the community in Europe? I think it is an important point.

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There are two ways. As you mentioned, the Bitcoin Amsterdam conference is an important tool, and it really varies from families bringing their kids and showing it to institutional investors. The other thing is that, as a treasury company, you are in a heavily regulated environment with lots of traditional institutions around you. You need a bank to support you and have a bank account, the regulator, different payment institutions, and everything around you.

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From those perspectives, education is equally important. It really goes from the young family to those institutions. If those institutions are not educated on digital assets, on the way things work, on Bitcoin, and on the long-term vision, there is often a natural skepticism. On the one hand, we are seeing increasing adoption and younger generations taking over, as you mentioned. On the other hand, there is still a lot of education to be done at all those levels. That is absolutely key for us.

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When it comes to education in the UK, the UK is known as a global financial center. But when you speak to investment banks and traditional investors in the UK, there is a challenge around education.

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Three years ago, anecdotally, I met the ex-chairman of one of the top five British banks. I spent four days with him because we were on a safari and had to share a cabin, so he got four days’ worth of Bitcoin talk. For two or three years, I had been talking to him about Bitcoin and discussing things that Bitcoiners discuss all the time, but they were just unaware these things were happening. They were unaware of the BlackRock ETF coming through, unaware of the strategic Bitcoin reserve announcement.

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It took until we took XCE public for him to say to me, I would like to participate and put something in, because it is in a wrapper they understand. When we speak to investment banks, they see it that way. Last year, I remember being at a London Stock Exchange event talking about Bitcoin treasuries, and they saw it as a bubble.

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The reality is that it is not the bubble, it is the pin. We are at an equivalent stage to Bitcoin 2013 adoption, where it will only become apparent in four years' time what advantage businesses that hold Bitcoin on the balance sheet have in the capital markets. Then it will probably drop 20%, and they will say that it has burst again.

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There is so much capital, especially in the UK, still watching from the sidelines. At some point, it will get there, but it takes time.

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Big time. I think that is why it is so important to have this kind of conference, not only here in Vegas but also in Amsterdam. We will also hold the first institutional conference in Spain in two weeks' time in Madrid, at MAD Bitcoin. That shows how much the whole community is growing. The Bitcoin community is very international, but it is also growing within each country. I feel like that is where we have to start.

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If we have to mention one last thing, why should investors and people in the U.S. look at Europe? What are we bringing? I would like each of you to say a few last words before we close the panel. What is it for Europe?

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Ultimately, when you go into a treasury company, you are long Bitcoin and short the respective currency. That is good diversification on the euro. Also, here we are all emerging Bitcoin treasury companies, and for smaller companies it should be easier to grow Bitcoin per share. The impact will be much larger. I would say those are two important drivers for U.S. investors to look at Europe.

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On my side, I would like to tell U.S. investors that there is a window of opportunity. We are just a new market, and we are showing the trajectory the treasuries have. Speaking specifically about us, we have only been accumulating for one year. At the end, you have a massive window of opportunity just because of the moment we are in now. I feel that should wake up the call to international investors.

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For us, we are based in the UK. We are on the OTC recently as well under XCE. As the UK environment became tougher, we started doing more revenue overseas. We do 70% of our revenue in the USA, Europe, and the Middle East. We hold all our reserves in Bitcoin. As Khing said, from a currency debasement trade, I have been a Bitcoiner for ten years, so I am quite short the British pound myself.

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If international investors are looking for exposure to an international company, there is no restriction in terms of where we would scale. We work overseas from the UK, but I would like to see us start developing overseas offices, and the U.S. is my favorite.

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To wrap it up, people in the U.S. should look at Europe because we are doing things differently. We all have our own take, and there are really big opportunities from an investment perspective and also from a regulatory perspective. Regulators are now taking Bitcoin more seriously, and things are going to be moving in the right direction. So I am very positive.

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Same. Absolutely.

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So are we.

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I am only positive on Britain because of Bitcoin, and driving the adoption throughout Britain.

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We are all brothers and sisters, right? Anyway, thank you so much. I don't know if anybody has anything else to add before we close.

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No, I think we covered it all. Thanks very much.

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Thank you.

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Thank you so much.