Digital Credit FAQ: Common Questions Answered

What is digital credit?

Digital credit is a category of exchange-listed income securities issued by Bitcoin treasury companies — primarily perpetual preferred stock that converts a Bitcoin-heavy balance sheet into instruments with different combinations of seniority, duration, and cash distributions. These securities are Bitcoin-backed in the balance-sheet sense, but holders do not have a direct lien on specific bitcoin. Current instruments include Strategy’s STRK (8.00%), STRF (10.00%), STRD (10.00%), STRC (11.50% variable), and STRE (10.00% EUR), plus Strive’s SATA (13.00% variable). The term was formally named by Michael Saylor at Strategy World 2026.

→ Full explainer: What is Digital Credit?

How does digital credit differ from crypto lending?

Digital credit is a listed security; crypto lending starts with a deposit. In crypto lending, investors hand assets to a platform that can lend, redeploy, or rehypothecate them. Digital credit is issued through SEC-registered public offerings, disclosed through offering documents, and traded through brokerage accounts on public markets. You can read the capital stack, ranking, dividend terms, and filing history. With crypto lending, the biggest risk was platform opacity — Celsius, Voyager, BlockFi, and Genesis collectively destroyed approximately $11.2 billion in customer claims. Digital credit holders own a recognized equity security with a liquidation preference and recourse through U.S. corporate and securities law. With digital credit, the biggest risks are issuer solvency, structural subordination, dividend discretion, and market pricing.

→ Full comparison: vs. Crypto Lending

Is digital credit safe?

No. Digital credit is not safe in any absolute sense. These instruments are perpetual preferred equity on a Bitcoin-concentrated balance sheet. Dividends are not contractually guaranteed — they are board-discretionary. Market prices can drop sharply. Permanent capital loss is possible if Bitcoin enters a prolonged bear market or the issuer faces governance issues. There is no FDIC insurance, no government backstop, and no principal protection.

Digital credit may suit sophisticated investors who understand Bitcoin volatility, can tolerate 30–70% drawdowns, and want income-oriented exposure with less day-to-day volatility than common stock. It is not suitable for conservative investors, retirees seeking principal protection, or anyone needing guaranteed income. The relative safety question is a capital-structure question, not a marketing question.

→ Full risk analysis: Risk Analysis

What are the risks of investing in digital credit?

The primary risks are: (1) Bitcoin price volatility eroding NAV coverage and pressuring dividend sustainability, (2) board discretion to suspend or reduce payments without triggering a default event, (3) secondary market price declines that can exceed 50% even if dividends continue, (4) non-cumulative risk on STRD where missed dividends are permanently lost, (5) issuer concentration — two companies represent the entire market, and (6) a track record of five quarters with uninterrupted dividends through a 40%+ Bitcoin drawdown — but no observed behavior through a full prolonged bear cycle.

There is no FDIC insurance, no collateral liquidation protection, and no guarantee against permanent impairment. Investors must be prepared to lose some or all of their principal.

→ Full risk analysis: Risk Analysis

How much can you earn from digital credit instruments?

Stated yields range from 8.00% (STRK) to 13.00% (SATA) as of April 2026, all calculated on a $100 stated value. But stated yield is only the starting point. Your actual return depends on the effective yield at your purchase price (which rises when the instrument trades below par and falls above), whether dividends are declared every period, and your exit price. An investor buying STRD at $75.79 captures an effective yield above 13.19% — but holds a security at a meaningful discount with non-cumulative risk.

Higher stated yield means you are taking more risk somewhere: lower seniority, weaker dividend protection, more issuer risk, or variable rate-reset exposure. The “extra” yield is compensation for real risk, not a free lunch.

→ Current yields: Markets & Instruments

Are digital credit dividends guaranteed?

No. Digital credit dividends are board-discretionary and not contractually guaranteed. Strategy’s offering documents state dividends are payable only “when, as, and if declared” by the board out of legally available funds.

The practical implications differ by instrument: cumulative instruments (STRK, STRF, STRC, STRE, SATA) accumulate unpaid dividends as an arrearage that must be cleared before common equity receives anything — creating economic pressure on the board to resume payments. Non-cumulative STRD offers no such protection: a skipped dividend is permanently lost, and the board owes nothing. STRC’s variable rate adds another layer — while it has historically moved upward, the offering documents explicitly state it may be set “significantly lower.” That is why “stated yield” is the right phrase — it describes the terms if dividends are declared, not a promise of cash on a fixed timetable.

→ Dividend mechanics: Markets & Instruments

What happens if a digital credit issuer goes bankrupt?

You go into the capital stack, and recovery may be partial or zero. Preferred stockholders rank above common equity but below all debt obligations, including any secured lenders, unsecured bondholders, and convertible notes. Strategy has issued convertible notes with claims senior to all preferred classes — meaning a bankruptcy scenario requires those notes to be made whole before preferred liquidation preferences are honored.

Recovery depends entirely on the value of Bitcoin holdings at the time of proceedings. If Bitcoin has declined severely enough to impair debt coverage, preferred holders may receive cents on the dollar or nothing. Dividend payments halt immediately upon filing. These instruments carry no FDIC insurance, no SIPC protection, and no government backstop. Digital credit can be attractive income paper in normal conditions; in a true insolvency, it behaves like risk capital.

→ Bankruptcy scenarios: Risk Analysis

What is the difference between cumulative and non-cumulative?

This is the single most important structural variable after yield when comparing digital credit instruments.

Cumulative means unpaid dividends accrue as an obligation. The issuer must clear all arrears before resuming common dividends or repurchases. STRK, STRF, STRC, STRE, and SATA are all cumulative. Some (STRF, SATA) carry additional step-up penalties that increase the rate on unpaid amounts — STRF’s compounding penalty escalates to 18%, SATA’s to 20%.

Non-cumulative means missed dividends are permanently lost — no accrual, no recovery, no recourse. STRD is the only non-cumulative instrument in digital credit. It carries the same 10.00% stated rate as the cumulative, senior STRF. If Strategy’s board skips a quarterly STRD dividend during a bear market, that income is gone forever. STRF holders in the same scenario would have a growing claim on Strategy’s balance sheet.

→ Glossary: Cumulative vs. Non-Cumulative

Which digital credit instrument has the highest yield?

On current stated yield: SATA leads at 13.00% (effective April 15, 2026), followed by STRC at 11.50%. On effective yield — which adjusts for market price — STRD can screen highest when it trades at steep discounts to par (currently 13.19% effective at $75.79). The answer depends on what you mean by “yield.”

None of those answers makes the instrument “best.” Higher yield means more risk or weaker protections. SATA’s premium compensates for smaller issuer scale. STRD’s premium compensates for permanent income loss risk. STRC’s rate can reset lower. Investors should match risk tolerance to position in the stack, not chase the highest number on a screen.

→ Full comparison: Markets & Instruments

Which digital credit instrument is safest?

Relatively speaking, STRF. It occupies the most senior position in Strategy’s preferred stack, carries cumulative dividends with compounding step-up penalties escalating to 18%, includes governance rights (board seats after four consecutive missed quarters), and has a fundamental change repurchase right at $100 plus accrued.

But “safest” is only relative. STRF is still preferred equity issued by a company with a Bitcoin-concentrated balance sheet and a B- issuer credit rating. Its dividends remain board-declared, not contractually mandatory. It trades as a perpetual with no maturity anchor. An investor comparing STRF to a Treasury note or an investment-grade corporate bond is comparing structurally dissimilar instruments. STRF is the safest answer within this category. It is not a safe asset.

→ STRF profile: Markets

Can you lose money with digital credit?

Yes. You can lose money in four distinct ways. First, market price decline — instruments can fall well below their $100 par; STRD currently trades at a ~24% discount. Second, dividend suspension — a board that stops declaring dividends eliminates the income return that justified the investment. Third, permanent income loss — on non-cumulative STRD, every missed dividend is irrecoverable. Fourth, issuer insolvency — in a severe-enough scenario, preferred holders may receive partial or zero recovery of their $100 liquidation preference.

Even if dividends continue, return-of-capital distributions reduce your cost basis and create future capital-gains liability at sale. Capital loss is a realistic outcome, not a theoretical footnote.

→ Risk scenarios: Risk Analysis

Is digital credit regulated?

Yes — as securities, not as bank products. Strategy’s and Strive’s preferred offerings are SEC-registered, filed through prospectus supplements, and listed on Nasdaq (and LuxSE for STRE). Issuers file 8-Ks, 10-Qs, and 10-Ks with full financial disclosure. That is materially different from the unregistered crypto lending products that drew SEC enforcement in 2022–2023.

Regulated does not mean safe, insured, or guaranteed. The SEC’s registration regime ensures disclosure — it does not endorse the instruments, guarantee dividends, or backstop investor capital. There is no FDIC insurance, no SIPC protection for the instruments themselves, and no government backstop. Regulation makes the risk more legible. It does not make the risk smaller.

→ Regulatory context: vs. Crypto Lending

How do I buy digital credit instruments?

Through any standard brokerage account with access to Nasdaq-listed securities — Fidelity, Schwab, Interactive Brokers, and most retail platforms. Search the ticker (STRK, STRF, STRD, STRC, SATA), place a limit or market order during exchange hours. No crypto wallet or special account required. Settlement is T+1 or T+2.

STRE requires European market access (LuxSE, Euro MTF) and is not directly available through most U.S. retail brokers. Limit orders are advisable for all instruments given that some trade at lower daily volume than large-cap equities — wide bid-ask spreads can result in unfavorable executions on market orders.

Buying the ticker is the easy part. Underwriting the terms is the hard part.

→ Instrument details: Markets & Instruments

What is the minimum investment for digital credit?

One share — typically $75–$105 at current prices depending on the instrument. Some brokers offer fractional shares, though availability varies by firm and security type (Investor.gov notes not all products qualify). There is no regulatory minimum, no accredited-investor requirement, and no lock-up period.

That low barrier makes digital credit more accessible than corporate bonds ($1,000–$250,000 minimums) or private credit ($250K+ institutional). Small ticket size reduces the barrier to entry. It does not reduce the investment risk.

→ Access comparison: vs. Traditional Credit

How are digital credit dividends taxed?

It depends on the issuer, the year, your account type, and your jurisdiction. For 2025, Strategy reported 100% of distributions on all preferred instruments as nontaxable return of capital — meaning distributions reduce your cost basis rather than generating immediate income tax. Once basis reaches zero, further distributions are taxed as capital gains. Strategy has indicated it does not expect to generate current earnings and profits for the foreseeable future, suggesting ROC treatment is likely to persist.

Return-of-capital treatment is favorable for after-tax yield but creates complexity at sale and is determined annually based on the issuer’s tax position — it can change. Strive has provided similar guidance for SATA. Consult a tax professional.

→ Tax treatment: Glossary

What is a Bitcoin treasury company?

A public corporation that treats Bitcoin as a core treasury reserve asset and raises capital around that strategy — actively issuing securities, managing capital structure, and measuring performance against Bitcoin-linked balance-sheet growth. The defining feature is not merely owning Bitcoin but building an entire capital structure around it. Strategy (~815,061 BTC) is the canonical example; Strive (~13,311 BTC) is the second.

Digital credit only makes sense in the context of this model: the issuer uses a volatile reserve asset to support a layered capital structure. The upside is new income securities. The downside is that the entire structure remains exposed to Bitcoin price, refinancing conditions, and capital-market access.

→ Full context: What is Digital Credit?

Who is Michael Saylor and what is the three-layer model?

Michael Saylor is Strategy’s founder and executive chairman. He conceived the Bitcoin treasury company model in 2020 and formally named the “digital credit” category at Strategy World 2026 (February 25, 2026).

The three-layer model organizes the Bitcoin capital stack: Layer 1 (Digital Capital) is Bitcoin itself — the reserve asset. Layer 2 (Digital Credit) is yield-bearing preferred securities issued against that reserve. Layer 3 (Digital Money) is stablecoins and programmable payments built on top of the credit layer. It is a useful framework for understanding why digital credit exists — but it is not a legal standard, a regulatory category, or a guarantee that any particular issuer will execute the model well. Investors still need to analyze the actual security, not just the narrative.

→ Full framework: The Investment Thesis

What is the difference between STRK, STRF, STRD, STRC, STRE, and SATA?

They serve different jobs in the capital stack. STRK — 8.00% convertible preferred; upside through conversion into 0.1 MSTR shares; lowest yield in the set. STRF — 10.00% senior-most cumulative preferred; strongest protections including step-up penalties and governance rights. STRD — 10.00% junior non-cumulative preferred; highest effective yield in Strategy’s suite but permanent income loss risk. STRC — 11.50% variable monthly payer; designed to trade near $100 par with rate resets; largest and most liquid instrument. STRE — 10.00% euro-denominated cumulative preferred; listed on Luxembourg Stock Exchange for European allocators. SATA — 13.00% variable monthly payer from Strive (not Strategy); highest stated yield in the category; smaller issuer with 57× less Bitcoin than Strategy.

These are not interchangeable tickers. Yield, seniority, cumulative status, currency, reset mechanics, and issuer all differ.

→ Full profiles: Markets & Instruments

How does digital credit compare to bonds?

Digital credit is closer to preferred equity than to bonds. A corporate bond is debt — the issuer has a legal obligation to pay interest, and a missed coupon triggers default. Digital credit preferreds have no maturity, rely on board-declared dividends, and sit below debt in the capital structure. That is why they offer higher stated yields (8–13.00% vs. ~5.1% for investment-grade corporates).

The structural differences matter: no maturity means no pull-to-par mechanism. No contractual coupon means no default trigger on missed payments. Lower priority means less recovery in insolvency. Digital credit can complement a fixed-income allocation for investors who understand the tradeoffs. It is not a bond substitute for conservative mandates.

→ Full comparison: vs. Traditional Credit

What is the BTC Rating?

BTC Rating is Strategy’s own illustrative coverage metric — not a rating-agency grade. In Strategy’s SEC filings, BTC Rating is defined as the ratio of Bitcoin NAV to the notional value of the instrument being rated plus all more senior instruments and any equal-priority liabilities that come due sooner. Higher is better, but Strategy explicitly states BTC Rating is “not equivalent to a traditional credit rating,” does not account for cross-defaults, and for preferred stocks does not fully reflect liquidation preferences above notional value.

BTC Rating is useful as a screening tool for comparing instruments by Bitcoin coverage buffer. It is not a substitute for full credit analysis. Strive’s equivalent metric shows approximately 2.27× coverage against its current capital structure.

→ Methodology: How we analyze

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For deeper analysis on any question, explore the full Digital Credit Hub.

This content is for informational and educational purposes only. It is not an offer to sell or a solicitation to buy any security. Review all offering documents on SEC EDGAR before investing.