Well, I'm thrilled to be joined here by Phong Le, President and CEO of Strategy. And I just want to dive right in and give a little brief background just for context that you know you came not from crypto but from traditional finance, dealing in very capital-intensive telecommunications companies and structured finance and a lot of the very complicated financial markets and financial products, into becoming the CFO of Strategy back in 2015, leading the move into Bitcoin. And you know, from software development to Bitcoin management, and now it's just this blossoming, blooming financial product market structure architecture. And if you could just help walk us through a little bit of where you're building now and how that background that you have is so critical to what you're building now.
Yeah. Well, thank you, Teresa, and thank you Money 20/20 for having us. You know, Bitcoin is this wonderful confluence of everything that I have spent time studying or doing in my life, whether it be technology, software, finance, macroeconomics, capital markets, and investing really. And so I feel like I was made for Bitcoin or Bitcoin was made for me, which is really exciting. And so what happened in 2020 is Strategy, which at that point in time was an enterprise software company, we decided to put Bitcoin on our balance sheet. And in the last six years, we have taken all that we've learned since being a company in 1989, public in 1998, and built it into a company that has 845,000 Bitcoin on our balance sheet, largest owner of Bitcoin in the world. And you know, back to Money 20/20, Bitcoin on our balance sheet is interesting and exciting for a digital asset company, a Bitcoin treasury company. But really, what's going to happen in the next two to five years is the confluence of digital assets, DeFi, and TradFi. And I look at this conference and you know, every single vendor on the show floor is talking about the intersection of DeFi and TradFi now. And of course, you know, the granddaddy of them all in DeFi is Bitcoin, and we hold 4% of all the Bitcoin in the world.
Yeah. It's amazing how you've been ahead of the curve, you know, this entire time. And I like that, the granddaddy of DeFi with Bitcoin, and now Bitcoin being digital capital and another transition that you've made. You know, it was the first DAT, the first digital asset treasury. And now what I really like about what you're continuing to develop is the idea of Bitcoin being the foundation of all these other financial products rather than just an asset on its own. And it's a very unique right now volatile product, but being able to build things that are more stable than the underlying asset is quite a talent that I think draws on your prior background. So digital capital kind of in practice, what makes Bitcoin so distinct of an opportunity to build what you're building?
Well, if you think about what Bitcoin is, Bitcoin is digital capital. It's a non-sovereign, decentralized store of value asset that is supply limited. It's the best form of capital that's ever been invented. But if I go and ask a bank or payment processor or a credit card company, what is your Bitcoin strategy? They'll likely look at me with a blank stare or say, I don't need a Bitcoin strategy. And they're not wrong because what are they going to do with an asset that increases, if you listen to JP Morgan, 10%, if you listen to us and others, 30% a year ARR with a 40 to 50 vol? Not much. So what we did is we engineered the volatility out and we stepped down the return and created a product called STRC, which is digital credit. What is digital credit? Digital credit is an income-generating, high-yield product that's built on top of Bitcoin that instead of having 30% ARR gives you 12% income tax deferred, and instead of having a 40 vol has a vol of less than 10. Now if I go to a bank or I go to a payment provider or a credit card company or a processor and I say what might you do with a product like that? What could you do with a product that has a vol of five and has a 12% return? They're like, "Hey, I can give income to people's deposits. I can give income to undeployed money, and now I can start providing products that my customers want and need." And so we've created on top of Bitcoin, digital capital, a product called STRC, digital credit. So that now the entire traditional finance system can build a set of products out, yield-generating products, products that can compete with money markets, products that can compete with T-bills, but they give people more income and more return. That's what we created the foundation for. And this is not a product for the DeFi world. It can be a product for the TradFi world. That's what we're seeing right now.
And that's something I think a lot of people miss is all the products that you do have available and that you are offering, and the digital credit is just the latest. And it's really fascinating because creating this dividend, the regular dividend, and can you walk us through these different products that you have because you have different products for different types of investors and what they're looking for, whether it's a fixed income or whether they want to look for appreciation, and how so many different types of investors can get access to Bitcoin without actually buying it, and all of these different types of opportunities with the products.
Yeah. If you think about Bitcoin and again let's call that digital capital with a 40% volatility at 30% return. Some people can buy our equity, our common equity, MSTR, right? And that's for people who are looking for something that outperforms Bitcoin over time, right? So Bitcoin's been up 38% a year for the last six years. We've been up 49% a year for the last six years, right? So we outperform Bitcoin, but we're even more volatile. We have a vol of 70 or 80. So that's one option, right? Like amplified Bitcoin. And then the other option are these preferreds. And by the way, we built these products in the traditional finance system using a four-letter ticker on the NASDAQ, so anybody can buy it on Robinhood, right? And we use what is a perpetual preferred, which is a product that has been around since the early 1900s. And we used an ATM to issue more of it, which has been something that's been around for 30 years. So we built a suite of perpetual preferred products: Stride, Stretch, Strife, Stride, and a Euro-listed one, Stream. And so those are the products we built on top of that. And so what are we really? We're a company that has built products, financial products on the Bitcoin standard. The entire banking industry are companies that built products on the US dollar standard, right? And the US dollar standard is pretty awesome, right? Like if you live anywhere not in the US, you will think the US dollar is the best thing in the world. If you live in the US, you actually do still think the dollar is the best thing in the world. You just wish the inflation rates weren't the same. So the alternative to a US dollar standard is digital capital, which is the Bitcoin standard. And we have built a set of financial products on top of the Bitcoin standard. So you could think of us, MSTR or Strategy, as basically an innovator in the Bitcoin standard. And I like to think, you know, we will over time look a lot like a Bitcoin bank. You know, not technically a bank, but like the existing banks today build on the US dollar standard a set of products, we are now building a set of products on the Bitcoin standard.
And you've had such success too with such a volatile asset, but yet being able to produce a lot of return and consistent return. It's not all promised, but you've been able to continue to do that. And when I'm looking at the architecture of it, you know, a lot of it seems based on the capital management, which is a huge part of it, and people are really betting on the company and a lot on your expertise to manage all these different types of whether it's cash reserves or Bitcoin, and when to do a buyback and at how much and of what, and you have different types of stock. And so can you explain to us a little bit more, help us kind of understand the strength in your capital management that has enabled you to be so successful and profitable.
Yeah. What I'll start with is the fact that we've been a public company since 1998. I've been a public company CFO or officer since 2015, and I've been in a finance role since 20 years ago, right? And so all the things that you learn running a public company, or heck if you run a private company, about capital management, cash management, balance sheet management, debt management, leverage, all of those concepts are still the same. Your formula is just a little different when you put it on an asset that has a 40 vol and a 30% return. And when you find an asset like that, and it's unique for sure, you can do a lot more interesting things, right? And what we found out is it's not for every public company to want to put a 40 vol, 30 ARR asset on their balance sheet, which is why you find it's primarily technology founder-led public companies, right? Block with Jack Dorsey, SpaceX and Tesla with Square, Strategy with Michael Saylor. So that's the finite list of companies that really want to do this. But what other companies want with capital management is they would love something, right? No treasurer really wakes up and gets excited about putting all of their cash into a one-year T-bill that returns 3.65%. Right? They also want to provide value to the company, but they don't want to necessarily buy Bitcoin. I totally get it. It's not within their investment strategy, but can they take a portion and put it into a public security like MSTR, or sorry, STRC, that can give them 12%? Right? And so this product, digital credit, what's really interesting about digital credit is we've taken Bitcoin, which is not necessarily appropriate for everybody in the world, and we created something that works for retirees, retail investors putting their short-term money into it, corporate treasuries, and banks in the decentralized finance system built on top of it. It's really a product that can truly be used by everybody.
Yeah. And an option too that is so great for people who want, well, nothing is promised, but that kind of income stream. So if you're on a fixed budget or I...
