Can Bitcoin Kill American Debt?

The U.S. is facing a serious financial challenge. The national debt is now over $36 trillion, and rising interest rates are making it more expensive to borrow money. Much of the debt that was issued during the COVID-19 era is about to roll over, meaning it needs to be refinanced at today’s much higher rates.

Bitcoin bonds as a solution

If nothing changes, taxpayers will be stuck paying hundreds of billions more in interest every year. But there may be a surprising new idea that could help: Bitcoin-enhanced Treasury Bonds, or Bitbonds.

This idea comes from Matthew Pines, director at the Bitcoin Policy Institute. His proposal is simple: when the U.S. issues new bonds, it could set aside a small portion of the money raised, say 1-10%, to buy Bitcoin.

Some of that Bitcoin would go into a long-term government reserve. The rest would be distributed over time to people who buy the bond, giving them a mix of stable returns from the bond, plus potential upside from Bitcoin.

Why do this? Because it could increase demand for U.S. bonds. With stronger demand, the government wouldn’t need to offer such high interest rates to attract buyers. That could save a lot of money.

It could also send a powerful signal. If the U.S. government starts buying and holding Bitcoin, it would show that it sees Bitcoin as a legitimate, long-term asset. That could boost trust in Bitcoin, and possibly raise its price, which would benefit both the government and investors in Bitbonds.

What’s the risk?

Pines says the downside is limited. If Bitcoin drops in value, the bondholder still gets the same return as a normal Treasury bond. If Bitcoin goes up, they get a bonus. It’s like a regular bond, but with optional upside.

Bitbonds wouldn’t replace the current financial system, they’d be a new tool the government could try. Pines recommends starting with a pilot program, to see how investors react.

It’s a bold idea. But with rising debt, global tensions, and limited political options, Bitbonds might offer something rare: a way to lower borrowing costs, promote financial innovation, and ease long-term pressure, without raising taxes or cutting spending.

And if it works, the idea might bring a lot of capital into Bitcoin, at which point the idea of exploring the same principle with different cryptocurrencies such as XRP and Ethereum might get explored.