Allow me to introduce Luke Xie, a visionary in the realm of Bitcoin innovation and the founder of SatLayer, a protocol designed to transform idle BTC into productive collateral. With a robust background in blockchain through his prior ventures, including co-founding Press Start Capital and the MIT x Harvard Blockchain Accelerator, Luke brings a wealth of expertise to the table. In this interview, we dive into the evolving landscape of corporate Bitcoin treasuries, exploring the urgent need for yield generation, the shortcomings of current solutions, and the potential for Bitcoin to cement its role as a cornerstone of institutional finance. Join us as we unpack these critical themes and envision the future of Bitcoin as productive capital.
How have rising interest rates shifted the perspective of corporate treasuries on holding idle Bitcoin?
Rising interest rates, especially above 4%, have really put the spotlight on the opportunity cost of holding idle Bitcoin. A few years ago, simply having BTC on the balance sheet was a bold statement, almost a badge of innovation. But now, treasuries are under pressure to optimize every asset for returns. Idle Bitcoin is seen as a drag on liquidity and a missed chance to generate yield, especially when traditional markets offer safer, interest-bearing alternatives. Corporate treasuries have a fiduciary duty to maximize value, and dormant BTC just doesn’t align with that mandate anymore. It’s become a glaring inefficiency that needs a solution.
What inefficiencies are corporate treasuries grappling with when they let Bitcoin sit dormant?
The biggest inefficiency is the lost potential for returns. Treasuries are used to parking cash in instruments that generate yield, even if it’s modest, to meet benchmarks and manage risk. Bitcoin sitting idle doesn’t contribute to those goals—it’s essentially dead weight on the balance sheet. Beyond that, there’s the perception issue. Investors and stakeholders expect capital to be put to work, not just held as a speculative bet. Without yield, Bitcoin holdings can start to look like a liability rather than a strategic asset, especially in a high-rate environment where every basis point counts.
Why do existing Bitcoin yield solutions like custodial lenders or offshore DeFi fall short for institutional needs?
These solutions often fail the basic tests of institutional rigor. Custodial lenders, for instance, have a history of overpromising returns and then collapsing, wiping out deposits with no recourse. Offshore DeFi, while creative, lacks the auditability and compliance frameworks that treasuries demand. These setups often operate in regulatory gray zones, which is a non-starter for institutions managing billions. Wrapped Bitcoin products introduce counterparty risk by moving assets off the Bitcoin base layer, which undermines the very security that makes BTC appealing. Simply put, these options don’t offer the custody standards, transparency, or risk controls that corporate treasuries need to even consider them seriously.
What are some of the specific risks tied to these current Bitcoin yield options?
Counterparty risk is a huge concern, especially with wrapped Bitcoin or custodial setups where you’re relying on third parties to secure assets. If those intermediaries fail, your BTC is at risk. Then there’s the lack of auditability—many DeFi schemes can’t provide verifiable proof of reserves or performance, which is a dealbreaker for institutions that live and breathe compliance. There’s also regulatory risk; offshore solutions often don’t align with the legal frameworks treasuries operate under, exposing them to potential penalties. These risks aren’t just theoretical—they’ve played out in high-profile failures that have made treasuries extremely cautious.
What should an ideal institutional-grade Bitcoin yield solution look like in your view?
It starts with keeping assets secured directly on the Bitcoin blockchain. That means custody and transaction finality are guaranteed by Bitcoin’s own infrastructure, not some intermediary or bridge. The solution should also prioritize on-chain transparency—think standardized attestations for reserves and performance, with reporting tools that make audits seamless. Yield needs to be tied to real economic activity, not fleeting token incentives. We’re talking about returns from services like oracles or liquidity provision that have lasting value. Ultimately, it’s about blending Bitcoin’s inherent security with the accountability and risk discipline of traditional finance.
Why is securing assets directly on the Bitcoin blockchain so critical for these solutions?
Bitcoin’s blockchain is the most trusted and battle-tested in the crypto space. Its security model—rooted in decentralization and proof of work—offers a level of assurance that no intermediary can match. When you move assets off-chain or wrap them, you introduce points of failure that undermine that trust. For institutions, who prioritize capital preservation above all, staying on the Bitcoin base layer ensures that custody isn’t compromised by third-party risks. It’s about leveraging Bitcoin’s core strength as a secure, immutable ledger to build yield solutions that don’t sacrifice safety for returns.
How can Bitcoin stay competitive with other ecosystems like Ethereum in attracting institutional capital?
Bitcoin has a unique edge as the most recognized and trusted digital asset. Its first-mover advantage, combined with unparalleled network security, makes it a natural choice for institutions looking for a store of value. Unlike Ethereum or others, Bitcoin isn’t bogged down by the complexity of smart contracts or scalability debates—it’s a straightforward, reliable foundation. But to stay competitive, it needs to evolve beyond just being a passive asset. Offering secure, auditable yield options quickly will lock in institutional capital by making Bitcoin a source of productive returns, not just a hedge. That’s the key to keeping treasuries committed.
What risks does Bitcoin face if it doesn’t adapt to the demand for yield fast enough?
The biggest risk is capital migration. Institutions aren’t sentimental—they’ll move their money to where returns are safer and more transparent, whether that’s Ethereum, Solana, or even traditional markets. If Bitcoin can’t provide yield solutions that meet treasury standards, it risks losing its lead as the go-to asset for institutional adoption. That would weaken its network effects and slow the growth of services built on top of it. Over time, Bitcoin could be relegated to a niche store of value rather than a dynamic financial layer, which would be a huge missed opportunity.
How could Bitcoin evolve into a foundation for a new economic layer in the financial system?
Bitcoin has the potential to become the bedrock of a new economic layer by turning idle BTC into productive capital. Imagine infrastructure like oracles, cross-chain messaging, or settlement services—all anchored to Bitcoin’s security. These could generate meaningful yield by powering real-world financial activity, not just speculative trading. If Bitcoin can support these services, it would compound its value by attracting more capital and use cases. It would shift from being just a digital gold to a core piece of the financial system, where treasuries and institutions actively build on and invest in its ecosystem.
What is your forecast for Bitcoin’s role in institutional finance over the next few years?
I’m optimistic, but it hinges on execution. Over the next few years, I see Bitcoin solidifying its position as a cornerstone of institutional finance if it can deliver secure, compliant yield solutions quickly. We’re already seeing billions in corporate treasuries holding BTC, and that’s just the start. If builders meet the demand for transparency and returns tied to real economic activity, Bitcoin could anchor a new financial layer that rivals traditional systems. But if we stall, capital will flow elsewhere. The window is tight, but the potential for Bitcoin to redefine institutional capital allocation is massive if we get this right.