Strategy Executive Chairman Michal Saylor has proposed the creation of Bitcoin-backed digital banking products that could attract up to $50 trillion as his firm buys another $962 million worth of BTC.
Bitcoin slipped more than 1% in the past 24 hours to trade at $89,907.39 as of 1:08 a.m. EST.
Bitcoin-Backed Digital Banking System Could Offer Clients Higher Yields
Speaking at the Bitcoin MENA event in Abu Dhabi, Saylor said that countries could use overcollateralized BTC reserves and tokenized credit instruments to create regulated digital bank accounts, which he says will be able to offer higher yields than traditional deposits.
The Strategy Executive Chairman noted that bank deposits in Japan, Switzerland, and Europe offer little to no yield to account holders. Meanwhile, euro money-market funds pay roughly 150 basis points, and US money-market rates are closer to 400 basis points, he added.
Saylor argued that those low yields are the reason investors are turning to the corporate bond market, which he says wouldn’t even exist if “people weren’t disgusted with their bank account.”
He went on to outline a structure in which digital credit instruments make up roughly 80% of a fund, combined with 20% in fiat currency and a 10% reserve buffer to help reduce volatility.
Saylor said that if such a product were offered through a regulated entity, depositors may end up sending billions of dollars to institutions to get access to the higher yields on offer.
Should a country offer such an account, Saylor predicted that the move could lead to “$20 trillion or $50 trillion” in capital flows. He also argued that a nation adopting the model could see it become the “digital banking capital of the world.”
Proposed BTC-Backed Accounts Mirror Strategy’s Own Offerings
Saylor’s pitch of a high-yield, low-volatility digital bank product is similar to some of Strategy’s own offerings.
In July, the company introduced its STRC offering, which is a money-market-style preferred share with a variable dividend rate of approximately 10%.
While the product has grown to about $2.9 billion in market cap, it has been met with some skepticism.
I will rephrase this: Every stock of STRC he sells gives Saylor the obligation to pay 10% with more likely MSTR stock every year, perpetually.
This increases the risk of selling BTC at some point.
That’s mainly because Bitcoin’s unpredictable short-term volatility has led to questions around the viability of BTC-backed, high-yield credit instruments.
Strategy Adds More BTC To Its Reserves
Strategy is the largest corporate Bitcoin holder globally. The company started purchasing BTC back in 2020 as part of a digital asset treasury plan. Over the years, the firm has consistently added BTC to its reserves.
Strategy’s most recent purchase was announced yesterday. Saylor said on X that his company bought 10,624 BTC for around $962.7 million last week.
The latest Bitcoin buy has pushed the company’s reserves to 660,624 BTC, data from Bitcoin Treasuries shows.
Strategy’s continued BTC accumulation comes even as the company’s share price has traded in a downtrend in recent months. Data from Google Finance shows that Strategy’s stock (MSTR) has plummeted more than 53% in the past six months.
The company also faces a potential removal from MSCI, which could trigger billion-dollar outflows for MSTR, analysts warn. A decision will be made on January 15.