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The recent suggestion by MicroStrategy founder Michael Saylor that Bitcoin holders should place their trust in large financial institutions for custody has ignited significant debate within the cryptocurrency community.
Saylor, who previously advocated for the benefits of self-custody, now contends that “too big to fail” banks and investment firms are the most suitable custodians for Bitcoin.
This viewpoint has faced strong backlash from Ethereum co-founder Vitalik Buterin, who termed the recommendation “insane.” He believes it contradicts the future of Bitcoin’s decentralized framework.
I probably contributed more than most to spread the “mountain man” stereotype (by the way, I consider those comments of mine outdated; snarks and AA have completely altered the tradeoff landscape), and I’ll gladly assert that I think @saylor’s remarks are absolutely absurd.
He seems to be explicitly advocating for a…— vitalik.eth (@VitalikButerin) October 22, 2024
Michael Saylor’s Transition from Bitcoin Self-Custody to Institutional Custodianship
Buterin’s remarks were prompted by an October 22 post from Casa’s chief security officer, Jameson Lopp.
Bitcoin self-custody isn’t solely about being a paranoid mountain man. There are numerous long-term negative consequences of persuading people to trust third-party custodians.
1. Centralizing coins into a limited number of hands elevates systemic risk of loss and seizure.
2. Bitcoiners face…— Jameson Lopp (@lopp) October 22, 2024
The Ethereum co-founder contended that Saylor’s push for centralized entities like BlackRock and Fidelity to manage Bitcoin custody is contrary to the very essence of cryptocurrency.
“There’s ample precedent illustrating how this strategy can fail, and for me, it’s not what crypto embodies.”
Following the FTX collapse in late 2022, Saylor asserted that self-custody was vital for preserving Bitcoin’s decentralized network.
Michael @saylor shared his thoughts on #BTC self-custody two years ago on the Blockware Podcast
Context: This was three weeks after FTX collapsed, leading to users losing BTC left on the platformpic.twitter.com/g4WnBUTKum
— Blockware (@BlockwareTeam) October 22, 2024
At that moment, he argued that the dangers of centralization and potential abuse by custodians would significantly increase without the capacity for individuals to hold their own Bitcoin.
“If you can’t self-custody your coin, there’s no way to create a decentralized network.”
However, during an interview on October 21, Saylor adopted a markedly different viewpoint.
When questioned about the possibility of the U.S. government confiscating Bitcoin from holders as it did with gold in 1933, Saylor dismissed such fears as “paranoid crypto-anarchist” thinking.
If you’re taken aback by Saylor’s recent remarks, then you haven’t been paying attention. https://t.co/Tf7CDM4LqT pic.twitter.com/GTAr2oXjEC
— Jameson Lopp (@lopp) October 21, 2024
He claimed that large financial institutions, already seasoned in asset custodianship, are better equipped to protect Bitcoin than individual users depending on hardware wallets.
Critics swiftly pointed out Saylor’s inconsistency. John Carvalho, CEO of Bitcoin payments company Synonym, expressed disillusionment with Saylor’s change in stance, especially considering the executive’s prior assertions that “Bitcoin is hope” for individuals pursuing financial autonomy.
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Dear Mr. @Saylor,
One of your most renowned memes (tropes?) is that “Bitcoin is hope.” I am curious about what exactly that signifies if we must disregard the “paranoid crypto anarchists” and their “tropes” as salespeople with hidden agendas.
Yes, there exists a group of Bitcoiners that focus on… https://t.co/fMpVHOLd5a— John Carvalho (@BitcoinErrorLog) October 21, 2024
Simon Dixon, author of “Bank to the Future,” proposed that Saylor’s change in viewpoint is part of MicroStrategy’s long-range strategy to eventually provide collateralized loans using Bitcoin, thereby establishing itself as a central figure in Bitcoin’s custodianship.
Let me decode that:
“I’m downplaying the significance of #Bitcoin in self-custody because I’m about to offer you a collateralized loan through my new bank.” @saylor#Bitcoin anarchists: continue assisting individuals in gaining freedom from banks, governments & central banks pic.twitter.com/T4v13JvDRF— Simon Dixon (@SimonDixonTwitt) October 21, 2024
The Significance of Self-Custody in Bitcoin’s Decentralized Ecosystem
Buterin and other notable figures like Jameson Lopp have highlighted the risks embedded in Saylor’s pro-institution perspective.
They assert that self-custody is not just a personal choice but a crucial element of Bitcoin’s decentralized structure.
Lopp outlines the dangers of centralizing Bitcoin ownership within a few major financial institutions in his commentary.
Bitcoin self custody isn’t merely about being a paranoid mountain man. There are numerous long-term adverse effects of convincing people to rely on third-party custodians.
1. Centralizing coins into a limited number of hands raises systemic risk of loss and seizure.
2. Bitcoiners face…— Jameson Lopp (@lopp) October 22, 2024
He cautioned that such a concentration of authority could result in the same systemic threats that Bitcoin was designed to avert, including asset seizure and misuse by custodians.
For Buterin, Saylor’s suggestion that Bitcoin should be managed by institutions built to be financial asset custodians undermines the decentralized promise of cryptocurrencies.
“Saylor’s perspective risks regulatory capture,”
Buterin warned that entrusting Bitcoin to institutions influenced by lawmakers and regulators could ultimately diminish Bitcoin’s capability to function outside the traditional financial framework.
He argued that this contradicts the fundamental ethos of cryptocurrency, which aims to provide individuals with financial independence without dependence on centralized intermediaries.
Despite the backlash, some supporters defend Saylor’s position, claiming it is aimed at institutions rather than individual users.
Julian Figueroa, founder of “Get Based,” observed that while self-custody may be feasible for individuals and small enterprises, larger institutions with numerous employees would inevitably need to depend on custodians.
saylor’s target demographic is institutions, NOT individuals.
he is not addressing YOU
institutions are not and never will be anarchists.
small businesses and plebs can possess hardware wallets and sovereignty
200+ employee institutions, pensions or wealth funds do not have…— Julian Figueroa (@kinetic_finance) October 21, 2024
Nonetheless, the wider crypto community remains skeptical, with many perceiving Saylor’s shift as a betrayal of the principles he once upheld.
The post Vitalik Buterin Takes Aim at Michael Saylor’s Bitcoin Custody Stance appeared first on Cryptonews.
