The CEO of the world's largest Bitcoin holding institution, Michael Saylor, is urging governments to develop a digital banking system backed by Bitcoin, offering high-yield, low-volatility accounts to attract trillions of dollars in deposits.
Saylor stated at the Bitcoin MENA event in Abu Dhabi that countries could create regulated digital bank accounts using over-collateralized Bitcoin (BTC) reserves and tokenized credit instruments, with yields surpassing traditional deposits.
Saylor pointed out that bank deposits in Japan, Europe, and Switzerland yield almost nothing; the yield on euro money market funds is about 150 basis points, while U.S. money market rates are close to 400 basis points. He noted that this also explains why investors are flocking to the corporate bond market, as "if people weren't so disappointed with their bank accounts, the corporate bond market wouldn't even exist."
Saylor proposed a structure where approximately 80% of the fund consists of digital credit instruments, paired with 20% fiat currency, and an additional 10% reserve buffer to reduce volatility. He stated that if such a product were offered by regulated banks, depositors might transfer billions of dollars to these institutions for higher returns.
He mentioned that the account would be supported by digital credit and managed by a fiscal entity with a 5:1 over-collateralization ratio.
According to Saylor, if a country offers such accounts, it could attract "20 trillion to even 50 trillion" in capital inflows. He believes that countries adopting this model could become the "global digital banking capital."
Before these remarks, Saylor revealed on the X platform that the company purchased 10,624 BTC for approximately $962.7 million last week. The latest purchase increased Strategy's Bitcoin holdings to 660,624 coins, with a total cost of about $49.35 billion and an average purchase price of $74,696.
Saylor's description of high-yield, low-volatility digital banking products bears similarities to Strategy's own product features. The company launched STRC in July, a money market-style preferred stock with an approximate 10% floating dividend rate, designed to keep the price near par value, supported by Strategy's fiscal operations linked to Bitcoin.
Although the market value of this product has grown to about $2.9 billion, it has also raised some concerns.
The volatility of Bitcoin is one reason some observers question Saylor's push for high-yield credit instruments backed by Bitcoin. Bitcoin has shown strong long-term returns, but its short-term performance remains unpredictable.
As of the time of writing, Bitcoin is trading at approximately $90,700, about 28% lower than its historical high of $126,080 on October 6, and has also dropped about 9% over the past 12 months, according to data from CoinGecko. However, from a five-year perspective, BTC has risen from $7,193 on January 1, 2020, by 1,155%.
In October of this year, former Solomon Brothers bond and derivatives trader Josh Man called Saylor's initiative "foolish" and suggested that STRC could face liquidity events. He wrote:
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Original article: “Michael Saylor Promotes Bitcoin-Backed Banking System to Governments”
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