Governance Glossary
Standard definitions for Treasury v2 governance terminology. These terms are used consistently across all published frameworks, artifacts, and implementation guidance.
65 of 65 terms
Bitcoin Treasury
The portion of a company's reserve assets held in Bitcoin under a documented governance framework — sitting alongside cash, money-market instruments, and short-duration fixed income, and subject to the same controls (IPS, segregation of duties, custody attestations, quarterly board reporting).
Owning Bitcoin is not the same as having a Bitcoin treasury. Without policy, controls, and reporting, a holding is a position; with them, it is a treasury.
The accumulation-first phase of corporate Bitcoin adoption. Focused on holdings size, mNAV, premium-to-NAV, and narrative leadership rather than governance depth, capital-structure discipline, or rehearsed stress response.
Most public conversation, equity research, and search behaviour still operates inside v1 framing. Boards and investors who stop there inherit fragility.
The governance-first operating model for Bitcoin on the balance sheet. Built on four published frameworks (RARTA, SRF, BEOL, RAES) that produce versioned, auditable decision trails for allocation, stress response, and operational hygiene.
Treasury v2 makes Bitcoin a defensible reserve decision rather than a narrative bet. It is the language boards, auditors, and long-duration investors use.
Issuing equity (or equity-linked securities) to acquire Bitcoin in a way that increases Bitcoin per fully-diluted share. Requires the effective per-share BTC acquired to exceed the per-share BTC given up to new holders.
Accretion is a function of execution price, premium, and issuance discipline — not a property of the strategy itself. Conditions that produced accretion in one cycle may produce dilution in the next.
The condition in which a Bitcoin treasury equity trades below the market value of its underlying Bitcoin (mNAV < 1.0). Typically signals lost confidence, capital-structure stress, or limited issuance optionality.
Discounts close the equity-issuance channel and can force a treasury company to defend Bitcoin holdings with cash flow, asset sales, or balance-sheet restructuring.
Conditions in which a company's mix of debt, equity, convertibles, and preferreds becomes harder to service, refinance, or roll — independent of Bitcoin's spot price. Triggers include covenant breaches, maturity walls, and lost market access.
Most forced Bitcoin sales originate in capital structure, not in price. Stress-testing the capital stack is more important than stress-testing the BTC price line.
The duration over which a company can meet operating obligations, debt service, and policy commitments using non-Bitcoin liquidity — cash, undrawn facilities, and near-cash assets — without selling BTC.
Runway converts volatility into a known operating condition. A treasury without runway is a treasury whose policy is set by margin clerks and counterparties.
The probability that a company will be compelled to sell Bitcoin to meet covenants, margin calls, redemptions, or regulatory requirements — regardless of management intent or policy posture.
Forced selling is the failure mode that converts a Bitcoin position into a permanent capital loss. It is a governance and capital-structure outcome, not a market event.
A written, board-ratified Investment Policy Statement (or addendum) covering Bitcoin: allocation bands, acquisition methods, custody architecture, accounting treatment, signing authority, reporting cadence, and exception handling.
Without a board-approved policy, every Bitcoin decision is ad hoc. With one, decisions become reviewable, repeatable, and defensible.
A rehearsed evaluation of how a Bitcoin treasury performs under defined adverse scenarios — price drawdowns, premium compression, refinancing failure, custody disruption, and disclosure pressure — measured against pre-approved response protocols.
A stress test that is not rehearsed in calm conditions is not a stress test. It is an assumption.
Satoshi Institute's published framework defining the 4-level stress taxonomy, objective triggers (e.g., -30%, -50%, -80% drawdowns), pre-approved authority transfers, and communication templates that govern Bitcoin treasury behaviour during adverse conditions. SRF overrides RARTA during stress states.
Stress is when governance either earns its keep or fails. SRF turns it into a rehearsed operating mode rather than a crisis.
Risk-Aligned Return Threshold Approach. The framework governing when to allocate to Bitcoin, how much, and who signs off — through a 4-component risk assessment and 6-factor decision matrix. Produces an Allocation Decision Log as its primary governance artifact.
RARTA is the difference between a board approving a number and a board approving a policy. It is the upstream artifact every other Treasury v2 framework depends on.
Bitcoin Economic Optimization Logic. Governs day-to-day operational decisions — custody rotation, execution windows, fair-value reporting workflows, and reporting hygiene — within a 5-level constraint hierarchy. BEOL defers to both SRF and RARTA.
Optimization without constraint is the most common operational failure mode for Bitcoin treasuries. BEOL prevents efficiency gains from creating policy or risk breaches.
A maturity assessment scoring an organisation's preparedness to adopt and operate Treasury v2 across governance, disclosure, liquidity, custody, and survivability. Used before, during, and after Bitcoin is added to the balance sheet.
Readiness exposes the gap between intent and capacity. Most failures happen because organisations move to allocation before they finish the readiness work.
The clarity, completeness, and timeliness of a Bitcoin treasury company's filings, MD&A, and investor communications — including policy disclosures, sensitivity analyses, custody arrangements, and exception reporting.
Disclosure quality is the externally observable proxy for governance quality. It is the variable most likely to move premium or discount.
The risk of loss, impairment, or operational disruption arising from the custody architecture used to hold Bitcoin — including qualified custodians, multi-sig configurations, key-management procedures, and attestation regimes.
Custody failure is one of the few risks that can convert a fully solvent treasury into a permanent loss overnight. It is a board-level concern, not an operations concern.
Exposure to the failure of any third party in the Bitcoin treasury operating chain: custodians, exchanges, brokers, lenders, prime services, and trading venues. Includes both credit and operational dimensions.
Counterparty risk is correlated. In stress, the same venues, lenders, and custodians fail at the same time. Diversification only works when it is engineered before stress arrives.
The risk of inclusion in or exclusion from major equity indices (S&P, MSCI, FTSE) as a function of Bitcoin treasury exposure, classification changes, or governance scoring — independent of operating performance.
Index actions move passive flows. For Bitcoin treasury equities, eligibility decisions can dwarf any operating or BTC-price move in the short term.
Risks that emerge from the interaction of Bitcoin holdings with capital structure, governance, disclosure, index status, and counterparty behaviour — rather than from Bitcoin price movement itself.
Treasury v1 measures first-order risk (price). Treasury v2 measures second-order risk (the response). Second-order risk is what actually ends companies.
Treasury v2 Core Concepts
An operating-system approach to Bitcoin on the balance sheet. Replaces ad-hoc allocation decisions with versioned governance frameworks (RARTA, SRF, BEOL, RAES) that produce auditable decision trails.
An organization's demonstrated ability to make, document, and defend Bitcoin treasury decisions under board scrutiny. Measured across policy clarity, role authority, stress preparedness, and audit trail completeness.
The principle that SRF protocols override RARTA during stress states, and BEOL operations defer to both. Prevents optimization decisions from violating risk limits or allocation policy.
A governance artifact specifying which role (board, committee, CFO, treasury team) holds approval authority for each category of Bitcoin treasury action, at each stress level.
A standardized, reusable document — template, checklist, decision log, or resolution — published by the Institute for organizations to adopt and calibrate to their context.
One of three implementation stages: Foundation (policy infrastructure), Calibration (parameter tuning and stress testing), and Operationalization (full framework integration with live governance).
The status conferred on a digital asset that clears all seven criteria of the Reserve Asset Eligibility Standard (RAES): settlement assurance, supply integrity, custody maturity, regulatory clarity, counterparty diffusion, accounting stability, and on-chain auditability. As of RAES v1.0, only Bitcoin meets the standard. ETH is classified Conditional / Watch; SOL and XRP are Not Eligible. See /standards/asset-eligibility.
RARTA — Allocation Framework
Risk-Aligned Return Threshold Approach. The framework governing how much Bitcoin to hold, under what constraints, and with what decision-authority structure. Covers threshold bands, allocation ceilings, and rebalancing triggers.
A predefined allocation range (e.g., 2–5% of liquid reserves) within which treasury operations may act without escalation. Breaches above or below trigger governance review.
The maximum Bitcoin allocation approved by the board, expressed as a percentage of total reserves or a fixed dollar amount. A hard constraint that RARTA enforces across all market conditions.
A governance artifact recording every allocation change: date, amount, rationale, approving authority, and market context at time of decision. Required for audit trail completeness.
A predefined condition (price movement, allocation drift, time interval) that initiates a portfolio rebalancing review under RARTA's decision-authority rules.
SRF — Stress Response Framework
Stress Response Framework. Governs organizational behavior during adverse Bitcoin market conditions. Defines stress taxonomies, escalation protocols, emergency authority transfers, and communication templates.
A classification system for adverse events by type (price, regulatory, custody, liquidity) and severity (Level 1–4). Each combination maps to a specific response protocol.
A severity classification (typically 1–4) triggered by predefined market or operational conditions. Higher levels activate broader authority transfers and more restrictive operational constraints.
A governance mechanism that temporarily elevates decision authority to a designated crisis role (e.g., CFO or Crisis Committee) when stress conditions exceed normal operating thresholds.
A single-page governance artifact listing exact conditions that activate each SRF stress level, the actions authorized at that level, and the communication requirements.
Pre-approved language for board notifications, investor communications, and regulatory disclosures during stress events. Drafted in advance to prevent ad-hoc messaging under pressure.
The specific sequence of governance actions triggered when Bitcoin's value declines by a predefined percentage from its cost basis or recent high. Part of SRF's stress response.
BEOL — Optimization Framework
Bitcoin Economic Optimization Logic. Governs day-to-day operational decisions: execution timing, custody rotation, fair-value reporting, and reporting workflows. Operates within constraints set by RARTA and SRF.
A governance artifact for entities reporting under the IFRS cost model (IAS 38), where impairment testing still applies. It gives a step-by-step decision flow for recognizing, measuring, and reporting an impairment. Under US GAAP fair value (ASC 350-60) there is no separate impairment test.
The planned movement of Bitcoin between custody providers or wallet types to manage concentration risk, comply with security policies, or respond to provider risk events.
A predefined time period and market-condition range within which treasury operations are authorized to execute Bitcoin purchases or sales without additional approval.
A step-by-step procedural document for routine treasury operations (e.g., quarterly rebalancing, custody audit, the fair-value close) ensuring consistent execution and documentation.
A quarterly process for reviewing and adjusting framework parameters (threshold bands, stress levels, execution windows) based on market data and governance experience.
Standards Development
The current version of a framework as published by Satoshi Institute. Carries a semantic version number and is revised when accounting rules, regulation or market structure change.
The version-numbering convention used for frameworks: major versions indicate breaking governance changes, minor versions add capabilities, patch versions fix errors or clarify language.
A dated record of what changed between versions of a framework.
Governance & Compliance
A pre-drafted governance document for board approval of Bitcoin treasury policy, specifying allocation limits, risk parameters, custody requirements, and reporting obligations.
The complete, chronological record of all Bitcoin treasury decisions, including who authorized each action, what data informed the decision, and what governance framework applied.
The documented governance process an organization can present to demonstrate that Bitcoin treasury decisions were made with appropriate care, diligence, and authority — not speculative enthusiasm.
Accounting treatment that values Bitcoin at current market prices on each reporting date. Under ASU 2023-08 (GAAP), now the required treatment for Bitcoin held as an asset.
An accounting write-down triggered when Bitcoin's fair value falls below its carrying cost. Under legacy US GAAP rules (pre-ASU 2023-08), impairments were recognized but recoveries were not. US GAAP now measures Bitcoin at fair value, so the test no longer applies there. It still applies under the IFRS cost model.
A financial institution authorized to hold Bitcoin for institutional clients, meeting regulatory requirements for security, insurance, and operational controls. A governance prerequisite for most treasury policies.
A custody configuration requiring multiple independent approvals to authorize a Bitcoin transaction. Used by institutions to prevent single points of failure and enforce separation of duties.
Market & Risk Metrics
Statistical measure of the maximum expected loss on Bitcoin holdings over a defined time period at a given confidence level. A standard input for RARTA threshold calibration.
The largest peak-to-trough decline in Bitcoin's value over a specific period. Used in SRF stress taxonomy to define severity levels and trigger thresholds.
An allocation methodology that scales Bitcoin position size inversely to its realized or implied volatility, maintaining consistent portfolio risk contribution.
The risk that large Bitcoin transactions cannot be executed at expected prices due to insufficient market depth. A critical factor in BEOL execution window design.
The difference between expected and actual execution prices when buying or selling Bitcoin. Managed through BEOL execution protocols including order sizing, venue selection, and timing rules.
The observed statistical relationship between Bitcoin and other portfolio assets during specific market conditions. Correlations shift during stress events — a key consideration in SRF design.