Saylor proposes banks lend against bitcoin

Michael Saylor, executive chairman of MicroStrategy, published a proposal recently to allow banks to accept bitcoin as collateral for loans. He urged U.S. financial regulators and banking firms to consider formal guidance that would define operational and prudential standards.

The proposal would permit banks to accept bitcoin pledged by borrowers, hold the cryptocurrency in custody under specified controls, and use agreed valuation methods when calculating loan-to-value ratios.

It would require banks to apply conservative haircuts to account for bitcoin’s price volatility and to maintain systems for rapid liquidation if borrowers default. Saylor wrote these measures aim to protect depositors and limit losses to lenders.

Saylor framed the plan as a way to integrate bitcoin into traditional credit markets by giving banks clear authority and operational rules for accepting the asset as security. He presented the proposal in a public forum and directed it to U.S. regulators and banking institutions.

If regulators adopt the rules, borrowers could obtain loans using bitcoin without selling their holdings. The change could affect corporate treasuries that hold bitcoin, individual investors seeking liquidity, and specialized lending desks that work in the crypto space.

Regulators and critics have pointed to risks from bitcoin’s price swings, operational security lapses and custody failures. Banks taking bitcoin as collateral would face market risk if prices fall rapidly, potentially triggering margin calls and forced sales.

The proposal notes some banks already offer custody and settlement services tied to digital assets but that broad lending authority and prudential standards are not widely established. MicroStrategy has accumulated large bitcoin holdings under Saylor’s leadership.

Industry participants say clear rules could prompt banks to build custody and risk-management infrastructure if regulators set standards, while debate continues over how to balance credit access for bitcoin holders with protections for depositors and lenders.