Michael Saylor, CEO of the world’s largest Bitcoin treasury holder, is urging nation-states to develop Bitcoin-backed digital banking systems. These systems would offer high-yield, low-volatility accounts designed to attract trillions of dollars in deposits.
Speaking at the Bitcoin MENA event in Abu Dhabi, Saylor proposed that countries could leverage overcollateralized Bitcoin (BTC) reserves and tokenized credit instruments. This approach would enable the creation of regulated digital bank accounts offering higher yields than traditional deposits.
Saylor highlighted the current low yields on bank deposits in Japan, Europe, and Switzerland. He contrasted this with euro money-market funds paying approximately 150 basis points and U.S. money-market rates closer to 400 basis points. He suggested that the limited returns from traditional banking are a primary driver for investors seeking opportunities in the corporate bond market, noting that this market "wouldn’t exist if people weren’t so disgusted with their bank account."
Saylor outlined a potential structure where digital credit instruments would constitute approximately 80% of a fund. This would be paired with 20% in fiat currency and an additional 10% reserve buffer to mitigate volatility. He suggested that if such a product were offered through a regulated bank, depositors could allocate billions of dollars to these institutions to achieve higher returns on their savings.
The proposed accounts would be secured by digital credit with a 5:1 overcollateralization ratio, held by a designated treasury entity.
According to Saylor, a nation implementing this model could potentially attract between "$20 trillion or $50 trillion" in capital flows. He posited that such an adoption could position the country as "the digital banking capital of the world."
These remarks followed Saylor's recent announcement on X, detailing MicroStrategy's purchase of 10,624 BTC for approximately $962.7 million in the preceding week. This latest acquisition brings MicroStrategy's total holdings to 660,624 BTC, acquired at an average cost of $74,696 per coin, totaling roughly $49.35 billion.
STRK Tests the Viability of Bitcoin-Backed Debt Products
Michael Saylor's vision for a high-yield, low-volatility digital banking product shares similarities with MicroStrategy's own offerings. In July, the company introduced STRK, a preferred share product structured like a money-market fund. It offers a variable dividend rate of approximately 10% and is designed to maintain its value close to par, backed by MicroStrategy's Bitcoin-linked treasury operations.
Despite its growth to a market capitalization of around $2.9 billion, the STRK product has also encountered skepticism from some observers.
One significant concern raised by critics is Bitcoin's inherent volatility, which leads some to question the feasibility of Saylor's push for Bitcoin-backed, high-yield credit instruments. While Bitcoin has demonstrated strong long-term returns, its short-term price movements remain unpredictable.
As of this writing, Bitcoin is trading around $90,700. This price represents a decrease of approximately 28% from its all-time high of $126,080 reached on October 6. Over the past 12 months, BTC has seen a decline of roughly 9%, according to CoinGecko. However, looking at a five-year timeframe, BTC has experienced a substantial increase of 1,155%, rising from $7,193 on January 1, 2020.
In October, Josh Man, a former bond and derivatives trader at Salomon Brothers, characterized Saylor's recent strategies as "folly." He suggested that STRK could potentially face a liquidity crisis. Man elaborated:
"The fiat banking system has been around a long time and has figured out how to build a moat around demand deposits so that they don't break the buck. Hiking rates on STRC to maintain/defend a peg or price level is not going to work when depositors want to get their money back out."
