Michael Saylor, the CEO of the largest Bitcoin treasury holder in the world, is advocating for nation-states to create Bitcoin-backed digital banking systems. These systems would provide high-yield, low-volatility accounts, potentially attracting trillions in deposits.
At the Bitcoin MENA event in Abu Dhabi, Saylor stated that countries could utilize overcollateralized Bitcoin (BTC) reserves along with tokenized credit instruments to develop regulated digital bank accounts that deliver higher yields than conventional deposits.
Saylor pointed out that bank deposits in Japan, Europe, and Switzerland yield little to nothing, while euro money-market funds provide around 150 basis points, and US money-market rates approach 400 basis points. He explained that this scenario drives investors toward the corporate bond market, which “wouldn’t exist if people weren’t so disgusted with their bank account.”
Saylor proposed a structure where digital credit instruments would make up about 80% of a fund, supplemented by 20% in fiat currency and a 10% reserve buffer to mitigate volatility. If such a product was made available through a regulated bank, depositors could move billions of dollars toward institutions for better returns.
The account would be supported by digital credit with a 5:1 overcollateralization held by a treasury entity, he noted.
Saylor mentioned that a country offering such accounts could attract “$20 trillion or $50 trillion” in capital. He argued that a nation adopting this framework could emerge as “the digital banking capital of the world.”
These comments followed Saylor’s announcement on X that his company had acquired 10,624 BTC for approximately $962.7 million last week. This recent purchase raised Strategy’s total holdings to 660,624 BTC, bought for an estimated $49.35 billion at an average of $74,696 each.
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Saylor’s vision of a high-yield, low-volatility digital banking product aligns with elements of Strategy’s own offerings. The company recently launched STRC, a money-market-style preferred share featuring a variable dividend rate of around 10%, designed to keep its price close to par while being supported by Strategy’s Bitcoin-linked treasury operations.
Although the product has grown to about $2.9 billion in market cap, it has faced some skepticism.
Bitcoin’s volatility is a significant reason why some analysts express doubts about Saylor’s advocacy for Bitcoin-backed, high-yield credit instruments. Although Bitcoin has shown robust long-term returns, its short-term market performance remains unpredictable.
At the time of this writing, Bitcoin traded around $90,700, approximately 28% below its all-time high of $126,080 achieved on October 6 and about 9% down from the past year, according to CoinGecko. However, over a five-year period, BTC has increased by 1,155% from $7,193 on January 1, 2020.
In October, Josh Man, a former bond and derivatives trader from Salomon Brothers, criticized Saylor’s strategy as “folly,” suggesting that STRC might face a liquidity crisis. He commented:
“The fiat banking system has been around for a long time and has managed to create a barrier around demand deposits to prevent losing their value. Raising rates on STRC to maintain or defend a peg or price point won’t work when depositors wish to retrieve their funds.”
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