TechFlow reports on September 25, according to The Block, Mark Palmer, an analyst at investment bank and research firm Benchmark, published a report stating that recent favorable developments in the cryptocurrency sector may encourage business intelligence company MicroStrategy to begin generating yield by lending out part of its Bitcoin holdings. Palmer noted that MicroStrategy Executive Chairman Michael Saylor had previously mentioned the idea of earning yield through Bitcoin lending but had been unable to implement it due to the lack of counterparties with sufficient financial strength and solid balance sheets. However, recent changes in the regulatory environment could alter this situation.
Last week, counsel to U.S. Senator Cynthia Lummis revealed during a public hearing that the U.S. Securities and Exchange Commission (SEC) has granted BNY Mellon, the largest custodial bank in the United States, a conditional exemption from compliance with SAB 121. That guidance requires entities choosing to custody crypto assets to record them on their balance sheets and create corresponding equivalent liabilities.
Palmer believes that if the SEC’s lenient stance toward digital assets and rising institutional interest extend beyond institutions like BNY Mellon, MicroStrategy may soon gain access to large institutional counterparties, enabling it to lend its Bitcoin with greater confidence. "Yield generated from lending a portion of its Bitcoin holdings could offset the annual interest on its debt; if the company feels confident lending larger amounts, such yield could serve as another way to increase holdings—without concerns about leverage or dilution," Palmer wrote in Tuesday’s report.
