BitBonds: Bitcoin + US Treasuries, what can reshape the financial landscape of the United States?

This article explores BitBonds' origins, how they work, its economic impact, and future prospects, and attempts to speculate on the long-term implications of this innovative tool. (Summary: BTC Policy Research Institute proposed "BitBonds": 10% of funds buy BTC, saving the United States $70 billion in interest a year) (Background supplement: "BTC Bond Company" came out, planning to acquire $1 trillion BTC) In today's global economic system, as the center of the world economy, the fiscal policy of the United States not only affects the domestic market, but also profoundly affects the international financial pattern. In recent years, with the rise of cryptocurrencies such as Bitcoin, the traditional financial system is facing unprecedented challenges and opportunities. A new financial instrument called "BitBonds" has been proposed to solve the long-standing debt problem in the United States by combining the characteristics of bitcoin and US Treasuries, while providing a viable path for the Trump administration's "budget-neutral bitcoin reserve strategy". This article explores BitBonds' origins, how they work, its economic impact, and future prospects, and attempts to speculate on the long-term implications of this innovative tool. The concept of BitBonds was first proposed by Andrew Hohns, founder and CEO of Newmarket Capital and Battery Finance, and Matthew Pines, executive director of the Bitcoin Policy Institute, to combine the decentralized nature of Bitcoin with the stability of traditional government bonds. The idea gradually entered the public eye during the 2024 US presidential election, especially as the Trump team made it part of a campaign pledge to build a national bitcoin reserve through a "budget-neutral" approach. According to relevant data, the core of this strategy is to use innovative financial instruments to buy bitcoin without increasing the federal budget deficit, thereby enhancing the competitiveness of the United States in the global economy. BitBonds' proposal is not unfounded. The United States is currently facing a national debt burden of more than $35 trillion, and interest payments are climbing year by year, which has become an important source of pressure on the federal budget. At the same time, Bitcoin's market capitalization, as an inflation-resistant asset, has grown rapidly over the past decade, attracting the attention of global investors. However, the direct use of taxpayer funds to buy Bitcoin is politically and economically controversial, so BitBonds is designed as a compromise that allows the government to hold Bitcoin without direct fiscal expenditure. BitBonds are essentially an improved version of U.S. Treasuries, unique in their return mechanism pegged to Bitcoin. According to publicly available information, its basic operation can be summarized in the following steps: Issuance and purchase: The U.S. Treasury issues BitBonds, and investors buy these bonds in U.S. dollars. Similar to traditional Treasury bonds, BitBonds have a fixed maturity date and base interest rate, but their earnings are partially pegged to Bitcoin. Bitcoin accumulation: The Ministry of Finance uses the funds raised from the issuance of BitBonds to buy Bitcoin on the open market. These bitcoins will be deposited in government-controlled digital wallets as part of the national reserve. Income distribution: When the bond matures, investors not only receive the base interest, but also receive additional returns based on the increase in the price of Bitcoin. For example, if the price of Bitcoin rises by 50% over the life of the bond, investors may receive a bonus pegged to that increase. This design is designed to attract investors interested in cryptocurrencies while reducing the cost of financing traditional Treasuries. Budget Neutral: Since BitBonds is funded by the market rather than taxpayers, and its interest expense may be partially offset by Bitcoin's appreciation, this mechanism is believed to enable the accumulation of Bitcoin reserves without increasing the federal deficit. The innovation of this mechanism lies in the fact that it embeds Bitcoin's potential value-added ability into traditional financial instruments, both preserving the security of treasury bonds and introducing the high yield potential of cryptocurrencies. Andrew Hohns and Matthew Pines believe that BitBonds can not only help the U.S. government hold bitcoin, but also ease debt pressure by lowering the interest rate on Treasuries. One of BitBonds' core goals is to alleviate the growing debt crisis in the United States. Interest payments on traditional Treasuries already make up a large portion of the federal budget, and the burden is mounting as interest rates rise. By introducing BitBonds, the Ministry of Finance can shift part of the cost of debt to Bitcoin's value-added potential. If the price of bitcoin continues to rise, the government will not only be able to reduce net interest expenses, but may also generate additional income through the sale of reserve bitcoins, thus achieving a "soft landing" of the debt problem. In addition, the issuance of BitBonds may reduce the yield demand for traditional Treasuries. Due to their pegged nature to Bitcoin, such bonds are more attractive to investors, and the Ministry of Finance may be able to finance at lower interest rates. This is a shot in the arm for the United States, which has long relied on a debt-driven economy. The implementation of BitBonds will significantly increase the legitimacy and market demand of Bitcoin. As the world's largest single economy, the formal involvement of the US government in the bitcoin market will give the cryptocurrency an unprecedented endorsement effect. Market analysts predict that if the United States succeeds in accumulating thousands or even tens of thousands of bitcoins, its price may rise sharply in the short term, attracting more institutional investors. However, this could also exacerbate volatility in the Bitcoin market. As a bulk holder, the government's buying and selling practices may trigger market panic or speculation. In addition, if other countries follow the lead of the United States in launching similar tools, the balance of supply and demand for bitcoin will be further broken, and price movements may become more unpredictable. The success of BitBonds may prompt other countries to re-examine their monetary policy and the relationship between cryptocurrencies. For example, the European Central Bank or the People's Bank of China may launch their own "crypto bonds" to counter the potential threat of dollar hegemony. Such competition could accelerate the diversification of the global financial system and weaken the dollar's position as the sole reserve currency. At the same time, BitBonds could draw greater international attention to the U.S. debt problem. If this instrument fails to effectively reduce the debt burden and instead causes fiscal losses due to the fall in the price of bitcoin, the credibility of the dollar may be further hit. This will provide upside for alternative assets such as gold and RMB. The implementation of BitBonds is not without controversy. Critics argue that tying national finances to highly volatile bitcoin is tantamount to a gamble that could trigger systemic risk in the event of a market crash. In addition, the policy could exacerbate wealth inequality – wealthy investors are more likely to buy BitBonds and profit from them, while ordinary people struggle to share in the dividends. Proponents counter that Bitcoin's long-term trend is upward, and BitBonds is designed to be flexible enough to avoid risk by adjusting the peg ratio or setting a stop-loss mechanism. They also noted that this tool will provide more exposure to cryptocurrencies for young Americans and thus promote the popularization of financial education. Realistic feasibility analysis of BitBonds Although BitBonds theoretically has a suction...