Benchmark: MicroStrategy may soon generate revenue by lending its held Bitcoin
ChainCatcher news, according to The Block, Mark Palmer of investment bank and research firm Benchmark stated that the recent support for the development of the cryptocurrency sector may encourage MicroStrategy to start generating revenue by lending out a portion of its Bitcoin holdings. MicroStrategy Executive Chairman Michael Saylor has mentioned the idea of lending some of MicroStrategy's Bitcoin for yield, but he believes it is not feasible due to the lack of counterparties with sufficient financial strength and robust balance sheets, which makes him hesitant to take this step. Benchmark's Mark Palmer pointed out that this situation may soon change.At a public hearing last week, Senator Cynthia Lummis's chief legal advisor revealed that the U.S. Securities and Exchange Commission has granted a conditional exemption to Bank of New York Mellon from the agency's SAB 121 guidance, which requires entities that choose to custody crypto assets to list them on their balance sheets and create corresponding liabilities equal to the value of the cryptocurrencies. The largest custodian in the U.S., Bank of New York Mellon, seems to have obtained cryptocurrency custody permission. Palmer stated that if the SEC's lenient stance on digital assets and the growing institutional interest extends beyond financial institutions like Bank of New York Mellon to corporations, then MicroStrategy may soon be able to engage with large institutional counterparties to lend Bitcoin and feel more confident in repaying loans.In a report on Tuesday, Palmer wrote: "The revenue generated by MSTR from lending a portion of its Bitcoin holdings could offset the annual interest on its debt, and if the company is willing to lend out more Bitcoin, it could use the related revenue as another way to increase its holdings without involving any concerns about leverage or dilution." Palmer noted that after issuing convertible bonds and exiting preferred notes, MicroStrategy may gain greater flexibility in accessing capital markets due to its reduced interest expenses and increased unencumbered Bitcoin reserves. He wrote: "While the premium at which MSTR trades relative to its net asset value (NAV) is a point of contention among investors, we believe that the flywheel effect emerging from its Bitcoin acquisition strategy supports the argument that the premium is justified, and this is a feature of the strategy rather than a flaw."
