BitBonds: The $2 Trillion Idea That Could Slash The National Debt
Many technologies that change the world don't start that way—they start as toys. This makes them easy to dismiss when they first appear.
History offers several examples: Before the Chinese used gunpowder for weapons, they used it for firecrackers. Before the Aztec learned from the Spanish how to leverage the wheel, they used it only for small playthings and figurines. And before the United States began building military-grade drones that revolutionized the battlefield, hobbyists used them for wildlife photography, FPV racing, and other forms of recreation.
The point: Paradigm-shifting technologies exist all around us—but the paradigm doesn't shift without a little push.
That push appears to be happening now with bitcoin.
What started as 'magic internet money' for cypherpunks and online gamblers has become a force multiplier for financial planners, CEOs, and most recently, US policymakers.
President Trump's establishment of a strategic bitcoin reserve last month is a case in point.
The President's 'crypto executive order' marked a watershed moment for digital assets: where forward-thinking policymakers once saw bitcoin as a threat to the dollar, many now see it as a companion. Advocates like Senator Cynthia Lummis, for example, believe a strategic Bitcoin reserve could halve the national debt by 2045.
But the strategic reserve is not the only bitcoin proposal aimed at strengthening the nation's finances. Even more provocative is the concept of bitcoin-blended bonds, or 'BitBonds.'
Imagine a financial instrument that could reduce the Treasury's debt burden by hundreds of billions of dollars while giving investors risk-free exposure to the best-performing commodity of the last decade. This is the promise—and ambition—of BitBonds.
Andrew Hohns, a PhD economist and the founder of investment firm Newmarket Capital, catapulted BitBonds to the center of bitcoin policy conversations in a March 11 presentation at the National Press Club. Dr. Hohns made the case that BitBonds, if properly structured, could substantially reduce the 10-year interest rate for US debt and put the country on firm financial footing—all while stocking the strategic bitcoin reserve at no additional expense to taxpayers.
Here's how:
BitBonds are like regular bonds in the sense that Treasury would allocate 90% of the bond to fund the government. But it would then use the remaining 10% of funds to purchase bitcoin.
Upon maturity, investors would receive 100% of the bitcoin upside up to 4.5% of the total compounded return. After this benchmark is reached, investors would receive 50% of all remaining bitcoin upside. Meanwhile, the government would keep the other 50% of remaining bitcoin upside to supply the strategic bitcoin reserve.
The concept of BitBonds takes cues from Michael Saylor's success in issuing convertible bonds to purchase bitcoin for Strategy's treasury.
Saylor's bitcoin treasury company has routinely issued billions of dollars in corporate debt at a mindboggling 0% coupon rate. How? Because investors are not buying Strategy (formerly 'MicroStrategy') bonds to secure yield but to reap potential upside on the stock. These bonds are 'convertible' in the sense that they can be converted to stock in the future.
The conversion process works as follows: If the Strategy stock increases by 55% after purchasing the Strategy bond, the investor has 'the option' to convert the bond into stock. This stock option built into the Strategy bond allows investors to reap the upside of bitcoin while assuming less risk than buying the digital asset directly. So long as Strategy doesn't default, investors are guaranteed to receive their full principal investment after the bond matures.
With its convertible bonds, Strategy has engineered a low-risk way for investors to gain exposure to bitcoin. But the beauty of BitBonds is that investors could gain exposure to bitcoin in a way that is nearly risk-free altogether.
When a BitBond reaches maturity, the government would return the full principal investment to BitBond purchasers—no matter bitcoin's performance. Investors could thereby gain significant exposure to bitcoin via BitBonds knowing full well that the government will return 100% of their initial investment. And they need not worry about default risk or corporate mismanagement since their investment is backed by the full faith and credit of the United States government.
In the worst-case scenario, bitcoin goes to zero. While this scenario is extremely unlikely, investors would still be guaranteed to receive in return 100% of their initial investment. So with BitBonds, the only risk investors would assume is opportunity-cost risk.
Both investors and the United States government could benefit in tremendous fashion from bitcoin-enhanced bonds. Not only could the Treasury use BitBonds to fortify the nation's bitcoin reserve in a 'budget-neutral' way, as prescribed by the President's executive order; it could also significantly lower the 10-year yield.
That's because demand for BitBonds—if it's anything like demand for bitcoin-linked convertible bonds in the corporate world—is likely to be red-hot. And red-hot demand would allow the government to issue BitBonds at an interest rate much lower than the typical 10-year Treasury note.
As a thought experiment, suppose the Treasury were able to issue $2 trillion in BitBonds at 1% interest. (This issuance would satisfy about 20% of Treasury's refinancing needs for 2025). The cost-savings for the government in this scenario could be unprecedented.
Instead of financing debt at 4.5% interest (i.e., the typical yield for a 10-year Treasury note), the government could finance a significant portion of its debt at just 1% interest. This would translate to approximately $70 billion in savings annually, or $700 billion in savings over the next 10 years.
If the government were to issue BitBonds each year, the total savings over the next two decades could significantly reduce the debt burden. According to Dr. Hohns, if bitcoin continues to grow at a strong rate, the bitcoin upside Treasury would reap from BitBonds 'could defease as much as $50.8 trillion of federal debt in 2045.'
Dr. Hohns recently joined Matthew Pines, the executive director of the Bitcoin Policy Institute, in publishing a report that outlines the BitBonds concept in full. I reached out to Dr. Hohns to understand the inspiration behind bitcoin-blended bonds.
'In 1981, the US had $1 trillion of debt,' said Hohns. 'Now, 44 years later, we're at $37 trillion. As Lyn Alden brilliantly said, 'Nothing stops this train.''
But if anything could stop the debt train, Hohns believes it's BitBonds: 'Through bipartisan action on BitBonds, we can simultaneously lower the US interest expense, add bitcoin to the federal balance sheet, and share in the benefits of this savings technology with everyday American families. It's a win-win-win.'
'For the first time in my life,' said Hohns, 'I am excited and energized by the emergence of a credible solution to defease the US debt.'
So what do lawmakers make of this idea?
I reached out to Senator Cynthia Lummis to get her perspective: 'I'm currently reviewing the Bitcoin Policy Institute report to learn more about the BitBonds concept. It's great to finally have an administration that is open to considering new and innovative ideas like this.'
Senator Lummis was key to mainstreaming the concept of a strategic bitcoin reserve, having introduced the first legislative proposal to put bitcoin on the nation's balance sheet in July 2024. Whether she embraces BitBonds could well determine if this bold new idea becomes reality.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
New York Times
19 minutes ago
- New York Times
Here Are Some of the Southern California Immigration Raids From the Past Week
Tension has been growing for months over the Trump administration's aggressive efforts to deport people who remain in the United States illegally. But the situation escalated in Los Angeles about a week ago. After protesters converged on immigration raids and demonstrated against U.S. Immigrations and Customs Enforcement officials, President Trump deployed 2,000 California National Guard troops to the city. While the focus has turned to ensuing protests in downtown Los Angeles and the heavy military response — the call-up has since increased to 4,000 National Guard members and 700 Marines — ICE agents have continued immigration raids each day in Southern California. It is difficult to have a comprehensive picture of the ICE efforts because the agency does not issue a list of people who have been detained each day nor the locations where they were taken from, and authorities did not confirm the number of raids they conducted in California this week. But residents, immigrant rights groups and elected leaders have cobbled together accounts of ICE workplace raids that they describe as indiscriminate attempts to find anyone who might be undocumented. Want all of The Times? Subscribe.
24 minutes ago
How major US stock indexes fared Firday, 6/13/2025
Oil prices leaped, and stocks slumped on worries that escalating violence following Israel's attack on Iranian nuclear and military targets could damage the flow of crude around the world, along with the global economy. The S&P 500 sank 1.1% Friday and wiped out what had been a modest gain for the week. The Dow Jones Industrial Average dropped 769 points, and the Nasdaq composite lost 1.3%. Crude prices jumped roughly 7% because Iran is one of the world's major producers of oil and fighting in the region could disrupt the flow. Treasury yields rose with worries about inflation. On Friday: The S&P 500 fell 68.29 points, or 1.1%, to 5,976.97. The Dow Jones Industrial Average fell 769.83 points, or 1.8%, to 42,197.79. The Nasdaq composite fell 255.66 points, or 1.3%, to 19,406.83. The Russell 2000 index of smaller companies fell 39.59 points, or 1.8%, to 2,100.51. For the week: The S&P 500 is down 23.39 points, or 0.4%. The Dow is down 565.08 points, or 1.3%. The Nasdaq is down 123.13 points, or 0.6%. The Russell 2000 is down 31.74 points, or 1.5%. For the year: The S&P 500 is up 95.34 points, or 1.6%. The Dow is down 346.43 points, or 0.8%. The Nasdaq is up 96.03 points, or 0.5%. The Russell 2000 is down 129.65 points, or 5.8%.
Yahoo
24 minutes ago
- Yahoo
How do Israel and Iran tensions impact the U.S.?
DAYTON, Ohio (WDTN) — Tensions continue to rise after an Israeli attack that targeted Iran's nuclear program. This comes before President Trump was scheduled to hold peace talks between the two countries. 2 NEWS spoke with local experts on what this all means for U.S. security. Five things to know about Israel's attack on Iran There are still a lot more questions than answers after this strike, as both sides continue to warn the other about continued attacks and retaliatory attacks, but one Cedarville University professor says any harm coming to U.S. soil is still relatively low. 'Tensions have really been rising between the two, especially in recent years,' said Dr. Glen Duerr, Cedarville University professor of international studies. Israel and Iran have been exchanging strikes over the past 24 hours, all centered around Iran's growth in nuclear weaponry. 'It must be at a point where Mossad, the roughly equivalent of Israel's CIA, said that Iran is a danger,' said Duerr. 'They're getting to a breakout point, where they need to act.' Duerr says a lot escalated following the October 2023 Hamas attack on Israel. 'Especially after October 7, 2023, when Israel's territory was attacked, and notably, as well, Iran for the first time directly attacked Israel via drone in April and then again in October of 2024,' said Duerr. Concerns have been raised as to if the U.S. could see an attack of this scale, or even a cybersecurity attack — especially towards prominent military locations like Wright-Patterson Air Force Base. But Dr. Duerr doesn't see that happening. 'It's certainly possible, but not likely. I think the target is Israel, although the Israeli and American defense industries are very, very closely coordinated, including in this area around Wright-Patterson Air Force Base,' said Duerr. 'Certainly Iran could target the United States in terms of a cyberattack, but it's the timing doesn't make an awful lot of sense.' Israel attacks Iran's capital with explosions booming across Tehran 2 NEWS reached out to WPAFB to see if they have increased security in response to the recent activity, but have not heard back. President Trump has attempted to hold peace talks between the two countries, but the outcomes of what could happen due to this conflict are endless. 'My sense is that we'll see this kind of lower level tension, some exchanges between the two continue with low intensity into the future until something that changes, whether it's Iran's nuclear weapons program being discontinued or, heaven forbid, something broader that happens in the Middle East as well,' said Duerr. Duerr tells 2 NEWS that the conflict will be continuing — especially if Israel feels that Iran's nuclear program could reach a critical breakout point. Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
