Let's welcome in our next guest or our first guest of the day, Phong Le, CEO of Strategy. And Phong, I guess your jury duty letter got lost in the mail somewhere.
Yeah, I'm not a resident of Florida, so I didn't get invited to the multibillionaire club in Miami.
I know. Looks like the start of the next great movie or something. But let's get into it. We're seeing major global banks move deeper into Bitcoin. Deutsche Bank was the latest and you just posted about that on X. What are you hearing from other institutions and what's still keeping some of the biggest banks on the sidelines?
I think over the course of the next year, you're going to see all the G-SIBs enter with Bitcoin-related services. You know, Deutsche Bank, interestingly, is coming in and they're the largest bank in the largest economy in Europe. It's a big deal. What they're doing isn't actually native crypto custody. And I think that's what you're going to start to see some of these banks that G-SIBs provide native crypto custody to compete with like Coinbase. But what's it going to take? Look, I think this was a watershed week and I've been saying it for a while. We just need clarity to pass or not to pass so that the CFTC and SEC and Treasury are going to go do their thing. You know, the rules that came out yesterday were the same things that were going to come out even if clarity passed, right? And so now that it's not passed, they're doing it with the power of the executive branch. So you're going to see a set of rules come out over the course of the next month from these groups and that's going to pave the way for banks to enter into crypto custody, crypto tokenization, stablecoins. It's going to be a mad dash in the next quarter.
And Phong, you talk about innovation coming to the market. MicroStrategy pioneered the innovation of digital credit. And you know, STRC's come back towards its $100 par value after going through an extended period of stress instead of raising the dividend, Strategy has opted to, you know, go for buybacks and you have about a billion dollars of board-approved cash left to continue those should you choose. You know, why buybacks over just adjusting that rate upward?
Well, first of all, I don't think the dividend increase is really what's going to increase the demand for STRC. And if you think about a dividend increase that creates an ongoing obligation to make payments to the existing STRC shareholders versus a buyback does actually the opposite. It reduces our dividend obligation. It reduces the payment overhang and it reduces total shares outstanding. So it's just a better strategy for us overall. And I think it's a matter of time we'll be back to par and we'll start the STRC Bitcoin buying engine again which you guys saw in full force in April and May.
Staying on that topic, now that you've seen how investors behave through a period of stress, what have you learned about the digital credit market that's changed how you think about building this business?
Well, I'll say, you know, we've talked to a lot of investors who are interested in STRC and if you think about institutional investors, they want to see a year or two-year track record of new instruments and they want to see it perform in a period of stress, right? They don't want to see something that is only doing well during bull cycles. They want to see what happened. And in our case, you know, it was painful. Went down from $100 down to $73 and now we bounced back up to $99 earlier this week. And I've talked to investors who are like you guys did exactly what we would have wanted you to do in that period of stress and it gives us more confidence to enter the market on the institutional side. So we learned a lot and I think we've also proven to investors that we can perform both in up markets and down markets.
And you know another innovation to your business model has been this idea of it kind of developing into a two-way strategy where it changes from, you know, never be a seller of Bitcoin and never be a net seller of Bitcoin. This idea that sometimes sales in the short term can actually be accretive in real Bitcoin terms. You know, how should the market be better thinking about that and how that two-way strategy might be driven going forward?
Yeah, I'll start with we're going to be long-term accumulators of Bitcoin. We have 840,050 Bitcoin. We're the largest holder of Bitcoin in the world. That's never going to change, right? This is not a sell Bitcoin forever strategy. This is a buy Bitcoin forever strategy. But look, as the largest holder of Bitcoin, as someone who wants to integrate the DeFi markets, Bitcoin into the DeFi markets into Strategy, people need to know that when you have an asset on your balance sheet that's $55 billion, that you're willing to do more than just buy and hold it. And so selling it when it makes sense, even if it's a small amount, and doing other things as Strategy gets into Bitcoin custody, are things that we're all looking at and pretty excited about.
It seems like, you know, whether it's accounting standards or market interpretations, when you're doing something innovative, the market kind of has to catch up to what you're doing. And I think one of those things is how whether it's the markets or regulators or accounting standards view, you know, cash, Bitcoin is a cash-like item on your balance sheet, right? You know, you've sold some of the Bitcoin in part potentially, probably just to show that it is cash-like and it does work in that manner. You know, the past couple weeks you've been building up, you know, a significant cash position reducing your net debt to zero and using the Bitcoin sales to pay dividends likely as evidence, like I said, of that cash-like property of Bitcoin as a proper cash-adjacent on the balance sheet. How much cash do you think going forward you're going to have, like true cash, do you think you're going to have to maintain on the balance sheet to kind of keep, whether it's credit agencies or the market, at ease and how long until that paradigm catches up where they start to view Bitcoin as a proper true cash-adjacent line item?
Yeah, I think your initial point is innovation requires iteration and it also requires collaboration, right? If you think over the course of the last 3 years, we've had significant wins with accounting, with FASB, with tax, with the IRS, with indices and MSCI, and we'll continue to do all those things in the background. We're doing a lot in working with traditional banks too. The question of how much cash, you know, I don't know that we have an answer right now, right? Like initially we had $2.25 billion which covered our dividends and interest anywhere between 3 years and one year as the STRC started to grow. Now we have $5.1 billion which is a little bit more than three years and we've added another 1.6 billion dollars of cash. So part of it is taking action and seeing how a market reacts to the instrument and the actions over time. So it's not like I have a number, right? Like we have two to three years of dividend coverage with our cash but it also is looking at how STRC reacts and how the market reacts and we talk to institutions, we talk to family offices, we talk to retail, we watch on X and we have to just iterate and find the right answer over time.
