Saylor Advises SEC: Bitcoin Not "Digital Currency"

• In a meeting with the SEC's Crypto Task Force, Michael Saylor lays out a plan to establish USD as "the global digital reserve currency"
• Compared to meeting notes provided by other industry players, Saylor's proposed "Digital Asset Framework" spreads thin in reaping actual benefits for the industry

The SEC's Crypto Task Force has begun taking meetings with the cryptocurrency industry, advising the agency on possible reforms. Last week, the Task Force met with Michael Saylor of Microstrategy, who presented his Digital Assets Framework – a guideline on cryptocurrencies drafted for the Trump administration, published on Saylor's personal website before inauguration.

In his proposal presented to the SEC, Saylor describes Bitcoin as a commodity, meaning "an asset without an issuer, backed by digital power." Bitcoin, according to Saylor, is to be distinguished from digital currencies, which he defines as "an asset with an issuer, backed by fiat currency."

Saylor's proposal to redefine Bitcoin – a peer-to-peer electronic cash system, according to the White Paper – as a mere investment asset are in line with previous statements made by Saylor, who opposes network updates needed to increase privacy on the base layer and scale non-custodial Bitcoin use.

Saylor's views have not been without controversy. Last year, he allegedly attempted to undermine protocol development funding to further ossification. In 2020, he told the BTC Times that Bitcoiners should "stop talking about regulatory arbitrage. Censorship-resistance, privacy, and tax evasion are bad ideas. We hate that" – a point Saylor has reiterated on numerous occasions, stating that "you don't really want the United States government to say Bitcoin is completely private, because now it becomes the perfect tool for money laundering, now it becomes the enemy” in an interview with Peter McCormack. 

Saylor does propose that cryptocurrency owners have the right to self-custody, as well as to trade and transfer their assets. However, Saylor also states that cryptocurrency owners must comply with local laws, stating that "all participants are civilly and criminally responsible for their actions," hinting at possible sanctions compliance to be enforced on a wallet level.

Under Rational Compliance to Empower Innovation, Saylor states that exchanges should be allowed to "to collect and publish asset data as a service to the industry and investors," and that regulators should be removed from the critical path of digital asset issuance, empowering exchanges to deliver integrated services to issuers, owners, and other exchanges – a proposal possibly in line with Microstrategy's previous plans to expand its services into blockchain intelligence.

Saylor's vision, as described in his Digital Asset Framework, is "A Capital Markets Renaissance," in which the United States may unleash "trillions of dollars in value creation" by enabling access to "tokenized commodities, real estate, art, businesses, teams, collectibles, IP, and brands" as well as to "financial instruments like equity, debt, derivatives, and currencies."

His overall goal, as described in the section of his framework titled "Opportunity", is establishing "USD as the Global Reserve Digital Currency" to "strengthen the US dollar, neutralize the national debt, and position America as the global leader in the 21st-century digital economy," which, according to Saylor, could for example be enabled by creating a Strategic Bitcoin Reserve.

Saylor's proposal to the SEC appears to echo his plans to have the US not just control the global reserve currency, but also what he describes as "the global capital network". "Buy 20-25% of Bitcoin on behalf of the US Government, catalyze the development, and we would control the world reserve capital network as well as the world reserve currency," Saylor told Yahoo Finance in December.

Compared to the supplemental meeting material provided by ZCash Board Member J.W. Verret, NYU Professor Andrew Hinkes, and Jason Gottlieb of Morris Cohen LLP, the Blockchain Association, the Digital Chamber, and the investment firm Paradigm, Saylor's Digital Asset Framework spreads thin, outlining few actionable steps that would benefit the cryptocurrency industry as a whole rather than cryptocurrency investors.

As the Blockchain Association suggests, "protecting non-custodial software, smart contracts, and front-end interfaces from being improperly subjected to regulatory frameworks designed for intermediaries or financial institutions" should be a priority for the Crypto Task Force. "An immediate review of all existing digital asset-related investigations, Wells notices, and in-process litigation cases" is "critical," writes the Digital Chamber.

As Paradigm states, withdrawing Amendments to the Exchange Act, which would require software developers and communication protocol providers to obtain SEC licenses, and withdrawing "Non-Custodial Digital Wallet Software Provider Lawsuits" should have high priority. "Fundamentally, non-custodial services are merely technology infrastructure, and should not be regulated by the SEC," advise Verret, Hinkes, and Gottlieb.

Bottom line, Michael Saylor proposes a framework that mainly benefits Michael Saylor, having little benefit for the industry.

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