Saylor Proposes Private Credit Built On Bitcoin

A study published by the Bank for International Settlements estimates that Bitcoin does not have the necessary architecture to become an everyday currency. Michael Saylor reaches a similar conclusion but advocates a different solution: keep BTC as capital and build credit products on top of this asset.

The BIS deems Bitcoin unsuited for daily payments

Economist Iñaki Aldasoro published on October 14 a study entitled “Money and the Architecture of Trust”. This 43-page document presents money as promises based on trust, credit, and support from public institutions.

While the market has just plunged again, the author estimates that a currency cannot operate on a large scale without banks, deposit insurance, and a lender of last resort. He believes that bitcoin rejects this organization because it depends on no issuer and its supply cannot adapt to economic needs.

His reasoning relies on several main ideas :

• Money allows final settlement of an obligation ;
• Credit constitutes a promise of future payment ;
• Banks create means of payment through credit ;
• The central bank provides liquidity in times of crisis ;
• The state and deposit insurance distribute possible losses ;
• Bitcoin lacks any equivalent public mechanism.

“Bitcoin aspires to become a currency without the architecture that allows money to function,” writes Iñaki Aldasoro. According to him, its supply limited to 21 million units prevents the system from responding to a sudden increase in liquidity demand.

The economist also recalls the difficulties faced in El Salvador and the Central African Republic after adopting BTC as legal tender. In both countries, its daily use remained limited. However, this observation is not enough to prove that Bitcoin will never serve payments in other contexts.

Moreover, the document is a personal analysis. The BIS specifies that the opinions expressed are those of the author and do not necessarily represent its official position or that of its member central banks.

Michael Saylor sees BTC as digital capital

Michael Saylor no longer presents bitcoin as a currency intended to directly settle each purchase. The executive chairman of Strategy primarily regards it as a scarce digital capital, comparable to a reserve asset upon which financial products can be built.

His position partially aligns with that of the study. Both approaches acknowledge that BTC does not yet fulfill the role of daily currency or unit of account. Wages, contracts, and prices remain mainly expressed in national currencies.

Saylor, however, wishes to develop a private credit layer on top of bitcoin. Users would keep BTC as the base asset, while preferred stocks, bonds, or less volatile digital currencies would serve for payments and yield seeking.

“Digital capital forms the foundation of digital stocks and digital credit,” he stated. He notably advocates a product indexed to the dollar, which would combine bitcoin-linked credit instruments with cash equivalents.

This organization recalls the historical role of gold. The metal remained in vaults while banks issued claims used for payments. The BIS study describes this model as a “credit superstructure”, but does not consider that Bitcoin could replace gold or central money in this system.

The disagreement concerns trust and crisis management

The BIS and Michael Saylor agree on the need for a credit layer. However, they differ on the institution responsible for guaranteeing its stability.

For Aldasoro, large-scale trust requires public support. A central bank can inject liquidity when private lenders withdraw. The state can also protect deposits and prevent an isolated bankruptcy from destabilizing the entire system.

Saylor prefers a private organization. In his model, shareholders and holders of the riskiest products absorb bitcoin fluctuations first. Each instrument then offers a different level of yield and protection.

Recent history invites caution, however. Celsius, BlockFi, and FTX had already built credit activities around cryptos before their collapse in 2022. Their disappearance showed that a claim backed by a digital asset can fail if leverage, governance, or reserves are poorly controlled.

The debate therefore no longer concerns only bitcoin’s capacity to pay for a coffee. It concerns the solidity of intermediaries that will transform a volatile asset into usable credit. The scarcity of BTC can support its role as a reserve, but it guarantees neither the solvency of issuers nor the safety of the offered yields.

DISCLAIMER

The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.