MicroStrategy founder Michael Saylor’s recent recommendation that Bitcoin holders should trust large financial institutions for custody has sparked massive controversy within the cryptocurrency community.
Saylor, who once championed the virtues of self-custody, now argues that “too big to fail” banks and investment firms are the ideal custodians for Bitcoin.
This stance has drawn sharp criticism from Ethereum co-founder Vitalik Buterin, who labeled the suggestion “insane.” He argues that it does not align with the future of Bitcoin’s decentralized nature.
Michael Saylor’s Shift from Bitcoin Self-Custody to Institutional Custodianship
Buterin’s comments were triggered by an Oct. 22 post from Casa’s chief security officer, Jameson Lopp.
The Ethereum co-founder argued that Saylor’s advocacy for centralized institutions like BlackRock and Fidelity to handle Bitcoin custody is antithetical to cryptocurrency’s ethos.
“There’s plenty of precedent for how this strategy can fail, and for me, it’s not what crypto is about.”
In the aftermath of the FTX collapse in late 2022, Saylor claimed that self-custody was a cornerstone of maintaining Bitcoin’s decentralized network.
At the time, he argued that the risk of centralization and abuse by custodians would rise dramatically without the ability of individuals to hold their own Bitcoin.
“If you can’t self-custody your coin, there’s no way to establish a decentralized network.”
However, during an interview on Oct. 21, Saylor took a markedly different position.
When asked about the possibility of the U.S. government seizing Bitcoin from holders like gold confiscation in 1933, Saylor dismissed such concerns as “paranoid crypto-anarchist” thinking.
He argued that large financial institutions, already experienced in asset custodianship, are better suited to safeguard Bitcoin than individual users relying on hardware wallets.
Critics were quick to point out Saylor’s inconsistency. John Carvalho, CEO of Bitcoin payments firm Synonym, expressed disappointment in Saylor’s change of heart, particularly given the executive’s earlier claims that “Bitcoin is hope” for individuals seeking financial sovereignty.
Simon Dixon, author of “Bank to the Future,” suggested that Saylor’s shift was part of MicroStrategy’s long-term strategy to eventually offer collateralized loans using Bitcoin, thereby positioning itself as a central player in Bitcoin’s custodianship.
The Importance of Self-Custody in Bitcoin’s Decentralized Ecosystem
Buterin and other prominent figures like Jameson Lopp have pointed out the dangers inherent in Saylor’s pro-institution stance.
They argue that self-custody is not merely a personal choice but a fundamental aspect of Bitcoin’s decentralized architecture.
Lopp lists the risks of centralizing Bitcoin ownership within a few large financial institutions in his post.
He warned that such concentration of power could lead to the same systemic risks that Bitcoin was designed to avoid, including asset seizure and custodian misuse.
For Buterin, Saylor’s suggestion that Bitcoin should be housed in institutions engineered to be financial asset custodians undermines cryptocurrencies’ decentralized promise.
“Saylor’s approach risks regulatory capture,”
Buterin warned that entrusting Bitcoin to institutions invested by lawmakers and regulators could ultimately weaken Bitcoin’s ability to operate outside the conventional financial system.
He argued that this goes against the very ethos of cryptocurrency, which is to offer individuals financial independence without reliance on centralized intermediaries.
Despite the uproar, some defend Saylor’s position, suggesting it targets institutions more than individual users.
Julian Figueroa, founder of “Get Based,” noted that while self-custody may be viable for individuals and small businesses, larger institutions with hundreds of employees would inevitably need to rely on custodians.
Even so, the broader crypto community remains unconvinced, with many seeing Saylor’s shift as a betrayal of the principles he once stood for.
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