Bitcoin Policy Institute Recommends BitBonds as Innovative Financial Tool for U.S.
The Bitcoin Policy Institute recently proposed that the U.S. adopt Bitcoin-enhanced bonds—BitBonds—as an innovative financial instrument that can help alleviate the burden of national debt interest while also increasing the U.S. Bitcoin reserves.
(Background: Has the U.S. entered the “Dollar-Cost Averaging Bitcoin Reserves” era? North Carolina’s bill allows “10% of funds to buy BTC,” barring sales from cold wallets.)
(Additional context: Key points of the bill for the U.S. to reserve 1 million Bitcoins: allows the purchase of BTC with gold and foreign exchange funds, prohibits sales within 20 years.)
Trump’s Bitcoin Strategy and Initial Steps
Last month, President Trump officially fulfilled his promise by announcing the establishment of the U.S. Bitcoin Strategic Reserve and Digital Asset Reserve. However, disappointing many, Trump’s initial plan only includes the approximately 200,000 Bitcoins already held by the U.S. and will not involve purchasing additional Bitcoins through selling gold or other means, which he termed a neutral strategy that would not exert more pressure on the current budget.
Think Tank Advocates for BitBonds to Acquire Bitcoin
On the last day of the month, the non-profit think tank Bitcoin Policy Institute submitted a policy brief recommending that the U.S. adopt Bitcoin-enhanced bonds—BitBonds—as an innovative financial tool to help Trump raise funds to buy Bitcoin. This brief was co-authored by Andrew Hohns, founder and CEO of Newmarket Capital and Battery Finance, and Matthew Pines, executive director of the Bitcoin Policy Institute. According to the policy brief, the function of BitBonds can be summarized in one sentence: on one hand, they help the U.S. reduce the burden of national debt interest, and on the other hand, they assist in increasing the U.S. Bitcoin reserves. Specifically:
- According to the plan, BitBonds will pay investors a fixed annual interest rate of 1%, denominated in U.S. dollars, which is significantly lower than the current 4.5% rate of U.S. Treasury bonds, helping to alleviate the U.S. debt interest burden;
- Additionally, 90% of the proceeds from BitBonds sales will be used for government general purposes, while the remaining 10% will be allocated for purchasing Bitcoin and depositing it into the strategic reserve;
This way, investors will benefit from fixed interest income and the appreciation of Bitcoin at the bond’s maturity, while the government can retain the profits from Bitcoin.
BitBonds Could Save U.S. $70 Billion in Interest Annually
To illustrate the benefits of BitBonds, the brief pointed out the severe current debt crisis facing the U.S., with approximately $9.3 trillion in federal debt set to mature within the next 12 months, leading to significant refinancing needs. The high interest rates not only pose a substantial burden on taxpayers but also restrict the government’s fiscal flexibility and economic growth potential. The Bitcoin Policy Institute suggests that if the U.S. adopts BitBonds, compared to traditional U.S. Treasury bonds, with a debt issuance volume of $2 trillion, BitBonds could help the U.S. save $70 billion annually in interest payments.
Are BitBonds Truly Feasible?
According to the policy brief, if the U.S. can indeed launch BitBonds, linking Bitcoin with U.S. Treasury bonds would undoubtedly be a significant boon for Bitcoin. However, it is worth noting that this strategy still has areas that need to be discussed, such as:
- Weak Low-Interest Competitiveness: The proposal assumes a 1% annual interest rate for BitBonds, significantly lower than the current yield of approximately 4.5% for U.S. Treasury bonds. During times of increased economic uncertainty, investors are more likely to choose traditional bonds with lower risk and higher returns rather than this low-yield product linked to a high-risk asset.
- Volatility and Risks of Bitcoin: On one hand, Bitcoin is known for its extreme price volatility, posing significant risks for both the government and investors; on the other hand, the government’s plan to allocate 10% of bond funds for purchasing Bitcoin implies that fiscal stability partially depends on a highly volatile asset. This contradicts traditional fiscal prudence principles and could exacerbate fiscal pressures during market downturns. If Bitcoin does not appreciate as expected, the government may not only fail to achieve budget neutrality but could also face a larger fiscal deficit.
- Policy Continuity: The Bitcoin reserve plan has already sparked political controversy within the U.S., particularly among fiscal conservatives and traditional financial supporters. The government’s decision to invest funds into cryptocurrency could be seen as a risky move, potentially affecting the continuity of policies in the future.
Related Reports
- Coinbase launches 24/7 Bitcoin and Ethereum futures: U.S. investors eager for perpetual contracts
- U.S. Poll: Only 10% support expanding cryptocurrency industry spending, over half oppose Trump’s Bitcoin reserve plan
- Former PBOC official: U.S. crypto hegemony threatens China’s financial security, but Bitcoin bubble burst “will hit the U.S. hard”