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Brazilian fintech firm Méliuz has made a bold move, adopting a bitcoin treasury strategy to escape the corrosive effects of Brazil's high interest rates and inflation. The company found its substantial cash reserves, primarily held in government bonds, were losing value after accounting for taxes and inflation, effectively being "confiscated." This led to a radical pivot towards Bitcoin as a means to preserve capital and achieve financial stability.
Key Takeaways
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Méliuz, a public Brazilian company, has adopted a bitcoin treasury strategy.
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The move is a response to Brazil's high benchmark interest rates (around 15%) and private borrowing costs exceeding 20%.
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Shareholders overwhelmingly supported the bitcoin treasury strategy, with record turnout.
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Méliuz is employing yield-generating strategies inspired by Japanese firm Metaplanet, such as selling cash-secured puts.
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The primary motivation is capital preservation, not speculation, with Bitcoin acting as an "escape hatch."
The Treasury Trap
In late 2024, Méliuz, a well-known cashback and financial services platform with over 30 million users, discovered a paradox: despite being profitable, debt-free, and growing, its market valuation was effectively zero when excluding its cash holdings. This cash, amounting to approximately R$250 million, was largely invested in government bonds. However, after taxes and the impact of inflation, the returns were negative, leading Méliuz's Head of Bitcoin Strategy, Diego Kolling, to describe the situation as "confiscation."
A Radical Pivot to Bitcoin
Faced with this "treasury trap," Méliuz decided on a significant shift for a Brazilian public company: embracing bitcoin. Kolling noted that the transition was surprisingly smooth, with shareholders strongly endorsing the bitcoin treasury strategy, with 66% participating in the vote – the highest shareholder turnout in the company's history.
Strategic Implementation
Instead of issuing dollar-denominated debt to acquire bitcoin, a common strategy elsewhere, Méliuz utilized share issuance and other innovative methods, including derivatives. Kolling explained that leveraging the debt market, while cost-effective in environments with low rates like the U.S. Federal Reserve's 4%, is not viable in Brazil, where benchmark rates are around 22% and private borrowing costs can exceed 20%. "Strategy competes with 4% Fed rates. We're dealing with 22%," he stated, highlighting the unfavorable economics.
Méliuz is also adopting strategies similar to Japanese bitcoin treasury firm Metaplanet. This includes selling cash-secured puts to generate yield on capital designated for bitcoin purchases. The income generated from these yield strategies is then used to buy bitcoin, while the principal remains intact. Kolling did not disclose the exact size of these operations but indicated that a maximum of 20% of bitcoin holdings are deployed in yield-generating strategies, with initial testing on smaller amounts.
Bitcoin as an "Escape Hatch"
While 80% of Méliuz's bitcoin holdings are kept in cold storage for security, small portions are used for yield generation through derivatives. The company is also exploring future strategies like the Lightning Network and bitcoin-backed debt. Ultimately, Méliuz's adoption of bitcoin is driven by a need for survival and capital preservation, rather than speculation. "Bitcoin became the escape hatch," Kolling concluded, "when holding fiat meant melting our treasury faster than we could build it."
Sources
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