How This Company Will Pay Bitcoin Dividends, Why It Could Fail At It
Publicly traded in the U.S. BTCS, a blockchain infrastructure company, has announced the first-ever dividend to be paid in Bitcoin. Called Bividend, the company claimed these BTC-backed dividends will support their “next chapter” on their roadmap to promote crypto and blockchain adoption.
BTCS has been operating since 2014 building “the infrastructure supporting blockchain technology”, during this time it has helped secure the networks for Cardano, BTC, Ethereum, Solana, and other cryptocurrencies.
The company is currently developing a non-custodial platform that will let people leverage Staking-as-a-Service and participate in their blockchain ecosystem of choice. The company was founded on the idea that “innovative software and the decentralized system will empower the future of finance and beyond”.
Their BTC dividend, a distribution of cash or stock made by the company from its earnings, will be paid to this company’s shareholders. In addition to BTC, BTCS investors will have the option to redeem their dividends in cash.
Each BTCS shareholder will receive $0.05 in BTC, depending on the price of Bitcoin when the dividends are due, per each of the company’s shares they hold. Otherwise, those inventors that opt for fiat currency will receive $0.05 per share. Charles Allen, CEO of BTCS said:
We want to reward our long-time shareholders for their continued support and encourage financial freedom by providing the means to enable direct ownership of Bitcoin and other digital assets.
Bitcoin Boost BTCS Shares After BTC-Backed Bond Announcement
The executive emphasized BTCS “long history of first” as he listed the company’s milestones since its launch. This included: the first company to mine BTC, the first to introduce a crypto-based treasury strategy and the first to participate in a proof-of-state blockchain by securing it. Allen added:
Now, we are the first Nasdaq-listed company to pay a Bividend, a dividend payable in Bitcoin at the option of our shareholders. This is a moment we have long anticipated since the Company purchased the domain, bividend.com, in February 2015. BTCS is now in the financial position required to execute on the Company’s vision.
In order to receive the BTC dividends, a shareholder will need to become a “record holder” for this company. This means investors will need to hold their shares with BTCS’s transfer agent, a company called Equity Stock Transfer, and not with a brokerage.
In other words, if a person wishes to benefit from this Bitcoin dividend, they shouldn’t purchase BTCS stocks with Robinhood or similar platforms. Otherwise, the shareholders will receive a cash dividend. BTCS claims they are working with their SEC-registered transfer agent to “coordinate the logistics” of the Bividend.
The company has seen a 52% rally in its shares, from $3 to around $4.61 after the announcement. This suggests there is a high interest in financial products that provide BTC exposure.
BTCS shares rallying in the daily chart. Source: BTCSUSD Tradingview
Why The First Bitcoin Dividend Could See Logistic Problems
Shareholders will have until March 16th, 2022, to complete the opt-in process. As Matt Levine explained, the process could experience complications as it is “uncommon” for people in the U.S. to personally own stocks.
Most investors own them via a third party, much unlike Bitcoin. Therefore, the logistics to pay each individual investor could prove difficult as the system of stock ownership, supported by the Depository Trust Co. (DTC), is obsolete. Levine explained the following:
(BTCS) would have to send the Bitcoins to DTC’s Bitcoin wallet, and DTC would have to send them to the brokerages’ wallets, and some of them would not have wallets and would get pretty upset (…) you might not have a Bitcoin wallet, and you might have trouble complying with your own custody obligations. So, a Bitcoin dividend would cause a lot of havoc for the intermediaries in the financial system.
As of press time, BTC’s price trades at $46,023 with sideways movement in 24-hours.
BTC moving sideways in the 4-hour chart. Source: BTCUSD Tradingview