Bitcoin is stretching its tentacles ever wider into the global financial system. In just the past week, several British companies joined the American march to turn themselves into Bitcoin holding companies, hot on the heels of German and Japanese companies which have done the same. All are emulating the strategy pioneered by Michael Saylor at MicroStrategy, a company whose sole raison d’être is to hold Bitcoin. And all, like MicroStrategy, are reaping rich dividends from this conversion, with some seeing their share values surge 700% or more in a matter of months.

These corporate re-inventions follow moves by regulators in several jurisdictions, including Britain and the European Union, to follow the lead of the Trump administration in loosening restrictions on crypto trading, thereby allowing established financial firms to begin dabbling in them. And the trend is spreading. South Korea this week ended a 14-year ban on so-called kimchi bonds, allowing investors to buy locally issued US bonds, which are then converted into Korean won. The move was prompted by the craze among Koreans to buy stablecoins, crypto-coins backed by US dollars.

The fact that most of the companies turning themselves into crypto hoards were previously small firms on the brink of extinction, and are suddenly flush with cash, might raise eyebrows. But they are in fact beating a well-trodden path. MicroStrategy was one of the dotcom detritus from the 2000 crash; its founder, Michael Saylor, was once charged by the Securities and Exchange Commission with fraud for overstating revenues (a lawsuit later settled out of court).

Ever adept at spotting opportunities, Saylor revived MicroStrategy in 2020 by purchasing Bitcoin — then using it as collateral to secure loans, which he used to buy even more Bitcoin. Using the firm’s Bitcoin holdings as its chief asset, he has been able to sell more shares, using the proceeds to buy more Bitcoin, in an upward spiral which sees both MicroStrategy’s share value and the value of its Bitcoin holdings drive each other upwards. In a relatively illiquid market, MicroStrategy’s aggressive buying all but guarantees a rise in Bitcoin’s price, which in turn guarantees rises in the company’s share price, which has tripled in just the last year.

Market old-timers can’t help but watch all this through their fingers. Despite being on a one-way street upwards, crypto’s advocates have yet to make a convincing case why it exists. But even if this party does end badly, it might not happen for a while. The US administration is putting its weight behind crypto, partly due to the close ties Donald Trump forged with the industry during last year’s election campaign, and partly because the promotion of stablecoins serves his administration’s goal of repressing interest rates by raising demand for US Treasury paper.

And with that American underwriting, fund managers everywhere are coming under pressure from their clients, who don’t want to miss out on the riches being mined. Fund managers, in turn, press their regulators to let them join the rush, lest their businesses lose clients to American rivals. Finally the regulators don’t want their jurisdictions to turn into backwaters, so they do what’s necessary to stay on the frontlines of global finance.

And somewhere Satoshi Nakamoto, the original creator of Bitcoin, must be smiling. Given that it was originally created to undermine the existing fiat-money system, its penetration of the temples of finance presage that very takeover. But whether crypto is the basis of a whole new financial system, as the Saylors of the world say, or a sleeper device that will one day explode the system, we wait to see.

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John Rapley is an author and academic who divides his time between London, Johannesburg and Ottawa. His books include Why Empires Fall: Rome, America and the Future of the West (with Peter Heather, Penguin, 2023) and Twilight of the Money Gods: Economics as a Religion (Simon & Schuster, 2017).

jarapley

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