Weekly Roundup 06/19/26 (STRC under pressure, Illinois' crypto tax, Open weight AI vs the AI boom) (EP.726)

STRC, MicroStrategy's preferred instrument with over $10 billion notional outstanding, has been trading below its $100 par value since mid-May, recently falling to $82. The decline appears driven by leveraged holders who took margin loans at six or seven percent to buy an instrument they believed yielded eleven or twelve percent, then faced margin calls that triggered a liquidation cascade. A comparable instrument, SATA, also fell to $93 before recovering to $97. Reports that hundreds of millions of dollars of stablecoins were issued against STRC prompted comparisons to Terra Luna, and a video exists of Jack Mahlers questioning Sailor on how MNav is calculated, with the two apparently using different methodologies. Sailor also disclosed he used GPT-4.0 to help design the STRC instrument.

Strategy separately paid down $1.5 billion of convertible notes roughly three years early. Those bonds carried a put right by the note holder at par in June 2028 at a conversion price of $672, making them effectively real debt that would have required redemption at par on that date, with failure constituting an event of default. Strategy holds approximately $553.3 billion worth of Bitcoin on its balance sheet, though its capital structure is described as very complicated and buyer beware.

MicroStrategy's options for addressing the STRC situation include suspending the dividend, buying back STRC at a discount, selling MSTR equity, or selling Bitcoin. Strategy had over $200 million of at-the-money equity sales in the prior week. The board has fiduciary obligations to both common and preferred shareholders, which would argue for selling Bitcoin to satisfy STRC holders, but selling Bitcoin would likely trigger a doom loop as market participants race to front-run the sales. Speakers emphasized there is no alignment between MSTR holders, STRC holders, and Bitcoin holders.

Illinois Governor J.B. Pritzker signed a 0.2 percent tax on all digital asset transfers into law on June 16th as part of a broader budget bill, taking effect January 1st, 2027. The tax was added at the last minute and applies even to self-custodial transfers such as moving assets from a hardware wallet to Coinbase. Speakers described it as unenforceable because self-custodial transfers cannot be monitored, and predicted immediate legal challenges likely to result in the tax being struck down as unconstitutional. Firms such as DRW and Jump would likely have to leave Illinois if the tax stands, and many large trading firms are already leaving Chicago for Florida.

Coinbase announced it will launch tokenized stocks backed one-for-one by underlying shares with dividends passed through. Hyperliquid did over $1 billion of volume for SpaceX on IPO day, while Binance and Bybit refunded customers after failing to get allocation in the SpaceX IPO to fulfill tokenized pre-IPO share demand. The CME sued the CFTC over its approval of perpetual futures for Coinbase, arguing the contracts are swaps rather than futures. The CFTC called the suit frivolous, and speakers characterized it as the CME protecting its turf, while noting the CME could become an enormous player in perpetual futures if it chose to enter. CME CEO Terry Duffy also announced his retirement.

MasterCard launched Agent Pay, a protocol that lets AI agents pay each other, logging spending permissions onto Polygon, with Adyen, Coinbase, and Cloudflare as early partners. Speakers disagreed on the most compelling near-term use case, with one favoring AI-driven Web 2 purchases such as grocery ordering and the other favoring payment for API calls.

Nick Carter argued that open weight models becoming closer to the frontier is increasingly important given export controls, and predicted that enterprise adoption of open weight models at roughly 100 times cheaper than frontier models is the thing most likely to puncture the AI capex explosion. Carter also raised the concern that an open weight distillation of a model like Anthropic's Claude could provide instructions to build biological weapons with no way to stop it, citing the vulnerable world hypothesis as relevant context. Amazon was said to have constructed a prompt that went outside Claude's guardrails, causing concern at the Commerce Department. Matt Walsh predicted frontier models will be licensed exclusively to American firms or the government, with open weight models lagging the frontier by one or two quarters becoming the default for most users due to cost, and that the rest of the world will likely end up with Chinese open weight models while the US retains access to frontier AI.

World Liberty Financial is reported to be close to winning an OCC National Trust Charter, which could allow it to issue and redeem a stablecoin, manage reserves, and provide custody. Alex Mashinsky received a lifetime ban from the CFTC and is believed to be in jail. SBF's odds of receiving a presidential pardon sit at 14 percent on prediction markets, with Trump indicating he would not consider a pardon and Senators Lummis and Hagerty filing a bipartisan resolution opposing one.