Michael Saylor Explains How the USD ‘Will Move on Bitcoin Rails’
Michael Saylor, the co-founder of MicroStratergy and Bitcoin enthusiast, recently shared his thoughts on the future of the US dollar. In an interview, he explained how Bitcoin’s adoption will actually help the dollar spread, by allowing more people to digitally use USD via “crypto rails”, or open monetary networks that allow for P2P transactions.
Bitcoin to Save the Dollar?
For most of the year, economists have considered the US dollar to be in a dire position. Stanley Druckenmiller has expressed fears that it will lose its reserve status, and Deutsche Bank are worried that USD will face significant inflation in the future. Plus, with El Salvador’s adoption of BTC as an official currency, people have been questioning whether the dollar is becoming less relevant on the world stage.
However, Michael Saylor appears to have taken a very different stance. In his interview with CoinDesk, he explained:
“I think the US dollar is going to spread to 5 billion people. I think that this decade is going to see the explosion of the US dollar as the reserve currency of the world. It will be the digital currency; it will be on every iPhone and every Android, in every country in Africa and Asia and South America. And it will move on Bitcoin Rails– the Bitcoin open monetary protocol is what [will allow] the US dollar to spread to billions of people. In an inflationary environment, money breaks down into two forms. There’s a medium of exchange, that will be the currency, and that will be controlled by governments and the US is probably going to be the most powerful one. And then you need a store of value, that’s an asset, and Bitcoin is the most powerful store of value on the Earth”.
Let’s unpack this statement. Essentially, Saylor is arguing that developments in Bitcoin and cryptocurrency are overall good for the US dollar because they help spread the dollar through a secure, digital manner. USD already has well-known digital capabilities via online banking and payment platforms such as PayPal and VISA’s internet gateways, but these are still inaccessible to people who are unbanked or underbanked.
In other words, the digital remittance tools the world is mostly accustomed to still require centralized intermediaries to function. However, as crypto expands throughout the world, it brings with it decentralized protocols that not only allow Bitcoin to be transacted, but also government-issued currencies in a permissionless way (via stablecoins).
Saylor is arguing that as these decentralized protocols gain worldwide popularity, individuals will begin using them to transact with USD, which will reinforce its global relevance. The reason he thinks Bitcoin will not replace USD as a currency is because users will instantly see its significance as a store of value, and will prefer to still use the dollar as a means of paying for goods and services—i.e. a medium of exchange.
Is Saylor Right About the Dollar?
Saylor has raised some interesting points. For starters, he is right to treat stablecoins as significant disruptors to the standard means of finance. Stablecoins are a huge part of the crypto world, and they help many to exchange money without needing permissioned payment gateways like PayPal.
He is also right to consider Bitcoin as a store of value rather than a standard currency, as Bitcoin is used as more of a store of value than a payments processor (or, more broadly, a medium of exchange). However, he has placed a great deal of importance on the dollar without justifying it. Arguing that USD will stay as a relevant currency because the US has the most powerful government is circular reasoning.
If the US government triggers high inflation and brings instability to its currency (as Drukenmiller and Deutsche Bank both fear), then countries and their citizens will look elsewhere for a more stable alternative, and this is especially true if they are already using cryptocurrency and decentralized protocols.
Countries, organizations, and indivudals will very much want to use a stable currency (which Bitcoin does not fit the category of) but they will not stay with the dollar if it begins to fail. They will simply move to another, more stable, currency. They may possibly look towards stablecoins that are not even backed by fiat, such as coins that are pegged to currencies frozen in time (i.e. how AmpleForth is pegged to the 2019 dollar, not the current dollar), or even synthetic blockchain assets that can be pegged to commodities such as corn, rice, or milk.
The rise of crypto and blockchain technology is arguably a sign that individuals are profoundly distrusting of centralized bodies, and the idea that these tools will lead people back to centralization seems far-fetched. At the same time, the world has its existing infrastructure—and changing that entirely, is difficult to envision.
MicroStratergy to Buy more Bitcoin
As a means of securing its position in the crypto markets, Saylor’s MicroStrategy has announced that it will be selling $1 billion worth of its own stock to help with the purchase of more Bitcoin. Within documentation sent to the SEC, MicroStratergy explained that:
“From time to time, we may issue and sell shares of our class A common stock having aggregate sales proceeds of up to $1,000,000,000… We intend to use the net proceeds from this offering for general corporate purposes, including the acquisition of bitcoin.”
The full $1 billion is unlikely to be spent on Bitcoin, although the document also notes that “management will have broad discretion in the application of the net proceeds from this offering” so there is still a slim possibility.
This is an extremely bullish sign from Michael Saylor. It shows just how much he believes the US dollar is unable to hold a store of value to any extent, even if he still thinks the dollar will be favored for worldwide transactions.
Do you think Michael Saylor is right about Bitcoin helping the US dollar to spread globally? Let us know in the comments below.