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Galaxy: The structural issues in strategy have not yet been fully resolved, and it is necessary to explore ways to generate income from its BTC holdings

Galaxy Research Director Alex Thorn stated that the capital management adjustments announced by Strategy on Monday mark an important turning point. In the weeks prior, the "digital credit" system of Strategy's preferred shares faced pressure, with the preferred share STRC falling below its $100 par value and hitting a historical low of $71.25 on June 26, leading the market to question how the company would pay the increasingly high preferred share dividends.Strategy subsequently announced a new digital credit capital framework, including a board-approved dollar reserve policy, a revised STRC dividend policy, a $1 billion preferred securities repurchase authorization, a $1 billion MSTR common stock repurchase authorization, and a BTC monetization plan. At the same time, the board raised the annual dividend rate of STRC from 11.5% to 12%, applicable to semi-monthly dividends for record dates on or after July 1. Following the announcement, MSTR rose 12.6% to about $92.70 on Monday, while STRC increased by 12.2% to about $83.70.Thorn believes that Strategy's approach is wise, but it may not permanently resolve structural issues. The company still has a large preferred share system and ongoing payment obligations, and it will face $6.7 billion in convertible bonds maturing in 2027 and 2028. The market is not truly concerned about Strategy's lack of assets, but rather whether it has sufficient dollar liquidity to pay dividends without harming BTC holders, MSTR common stock shareholders, or preferred shareholders. By raising over $1 billion in cash through the sale of common stock, setting a minimum cash reserve policy for 12 months, and increasing the current cash coverage ratio to about 17 months, Strategy has bought itself time.The most controversial aspect is the BTC monetization plan, which seems to clearly indicate that Strategy may sell BTC from time to time. Thorn does not want to see Strategy sell Bitcoin, as the company's identity and the MSTR premium are built on its narrative as a long-term BTC exposure tool, and selling BTC would undermine that story.However, he also believes that if selling a small amount of BTC can prevent a disorderly spiral in the capital structure, protect preferred shares, and wait for a better market environment, this path can be justified. Strategy should explore how to generate income from its BTC assets without directly selling spot BTC, including conservatively lending a small amount of isolated BTC or using options strategies to capture volatility gains.

The U.S. Congress discusses the Federal Reserve's "streamlining of the master account" and evaluates whether cryptocurrency and fintech companies can directly connect to the central bank's payment system

On Wednesday, the U.S. House Financial Services Committee held a hearing to discuss the changing roles of banks and fintech companies, with one focus being the "streamlined master account" proposal that the Federal Reserve is considering, which would allow certain crypto banks and fintech companies limited direct access to the Federal Reserve's payment system. A Federal Reserve master account allows financial institutions to directly use the Federal Reserve payment network and gain the most direct access to the U.S. dollar monetary system. Institutions without this account typically need to rely on partner banks that have master accounts to provide services.The so-called "streamlined account" is a limited-function version intended to provide limited access for new financial institutions. Republican Congressman Dan Meuser stated at the hearing that access to the Federal Reserve payment system is no small matter, and the core issue is which institutions should be allowed to directly use these critical payment channels. Traditional institutions like community banks are concerned that crypto and fintech companies are not subject to equally stringent regulation, and direct access could pose risks to security and stability. The crypto industry generally supports the proposal, arguing that direct access to the Federal Reserve payment system should have been opened long ago, as it would help reduce reliance on intermediary banks and promote innovation.In May of this year, Trump also signed an executive order requiring the Federal Reserve to assess policies for opening central bank payment channels to fintech companies, including crypto companies. Previously, the Kansas City Federal Reserve had approved Kraken's parent company Payward for a "limited purpose account" in March, sparking discussions in the market about the extent to which crypto and fintech companies should have direct access to Federal Reserve services. A representative from Anchorage Digital stated at the hearing that if the U.S. wants to continue as a global financial center, it needs to allow for innovative federal and state regulatory frameworks.
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