In a surprising turn of events, Brazilian fintech firm Méliuz (CASH3) has adopted a unique strategy to ensure its financial future amidst challenging market conditions. During a recent balance sheet review, the company discovered it was profitable, debt-free, and experiencing growth. However, its market valuation was found to be effectively zero when adjusting for the cash held, which amounted to approximately R$250 million predominantly invested in government bonds. After accounting for taxes and inflation, these returns were negative, prompting company executives to state that they were essentially experiencing a confiscation of value.
Recognizing the urgency of the situation, Méliuz made a bold decision to pivot towards bitcoin as a treasury asset. Diego Kolling, the Head of Bitcoin Strategy at the company, highlighted that this transition was notably smooth, supported by a remarkable shareholder response. Two-thirds of shareholders participated in the vote to implement a bitcoin treasury strategy, marking the highest turnout in the company’s history.
Unique among Brazilian public companies, Méliuz avoided the common route of issuing dollar-denominated debt to acquire bitcoin. Instead, the firm opted for share issuance and derivatives strategies to finance its bitcoin purchases. Kolling explained that leveraging the debt market is often more costly in emerging markets like Brazil, where benchmark interest rates approach 15%, and private borrowing can exceed 20%. He underscored the disparity: “Strategy competes with 4% Fed rates. We’re dealing with 22%.”
Méliuz is also inspired by the operational model of the Japanese bitcoin treasury firm, Metaplanet. The company has begun implementing a similar approach by selling cash-secured puts to generate returns, which allows them to buy bitcoin using the resultant income while keeping a portion of capital set aside in yield-generating endeavors.
While specific figures regarding Méliuz’s bitcoin operations were not disclosed, it was emphasized that the firm maintains a conservative strategy by limiting the use of yield-generating methods to approximately 20% of its bitcoin holdings. The firm started cautiously, experimenting with smaller amounts before scaling up investments.
Méliuz, widely recognized for its cashback and financial services platform catering to over 30 million users in Brazil, has adopted a highly secure strategy for its digital assets. Presently, 80% of its bitcoin is stored in cold wallets, and only a minimal portion is utilized for yield generation via derivatives. Future expansions may include strategies involving the Lightning Network or bitcoin-backed debt to further enhance its operations.
Despite the risks associated with cryptocurrency, Kolling stated that the primary motivation behind this pivot is not speculation, but rather survival. “Bitcoin became the escape hatch,” he noted, emphasizing that maintaining fiat currency was leading to a rapid depletion of their treasury. This strategic pivot marks a significant step for Méliuz, reflecting a broader trend of fintech companies seeking innovative solutions amidst economic uncertainties.
