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Forbes
22-04-2025
- Business
- Forbes
BitBonds: A New Take On Treasury Bonds To Tackle The U.S. Debt Crisis
Bitcoin vs. the Dollar: Visual equation with $100 bills, Bitcoin symbol, and question mark on dark ... More blue background. In a novel fusion of tradition and innovation, a number of economists, Bitcoin advocates, and financial insiders are rallying behind a proposal to reshape U.S. fiscal policy through the issuance of what the Bitcoin Policy Institute (BPI) calls Bitcoin-Enhanced Treasury Bonds—also referred to as BitBonds or ₿ Bonds. First outlined in a white paper by Andrew Hohns and Matthew Pines, and supported by a wide range of policy advisors and investors, BitBonds promise a tantalizing trifecta: fiscal relief, strategic asset accumulation, and wealth-building for everyday Americans. This isn't just economic theory. On March 6, 2025, President Donald J. Trump issued an Executive Order officially designating Bitcoin as a strategic reserve asset—"digital gold"—and established the U.S. Strategic Bitcoin Reserve. The Executive Order instructed the Secretaries of Treasury and Commerce to explore budget-neutral ways to acquire Bitcoin. The BitBonds proposal is, in the words of Hohns, "a direct implementation of this directive.' The U.S. faces a staggering fiscal cliff: $9.3 trillion of federal debt is set to mature within the next 12 months, and over $14 trillion within three years. Refinancing that debt at prevailing market rates (around 4.5%) threatens to deepen the national deficit and strain taxpayers. 'The refinancing wall is real,' explains Hohns, CEO of Battery Finance and co-author of the proposal. 'At today's rates, the Treasury would spend roughly $90 billion annually in interest on $2 trillion of bonds. But by issuing BitBonds with a 1% coupon, the government could reduce that burden to $20 billion—saving $70 billion per year.' Over a decade, that adds up to $700 billion in nominal savings, with a present value of $554.4 billion—even after accounting for $200 billion allocated to Bitcoin purchases. VanEck's Matthew Sigel also sees BitBonds as viable, expressing measured but positive support for the idea via X. He called the structure 'an aligned solution for mismatched incentives,' noting it could help the Treasury lower borrowing costs while offering investors asymmetric upside tied to Bitcoin. Sigel emphasized that even in flat BTC scenarios, low-coupon BitBonds could save the government billions in interest, while higher Bitcoin growth could unlock substantial shared gains. Still, he acknowledged trade-offs, including investor exposure to downside risk and potential issuance complexity. Each BitBond functions like a standard 10-year Treasury bond but with a twist: 90% of the funds go to traditional government expenditures, while 10% is used to purchase Bitcoin for the Strategic Reserve. Investors receive: For the first 4.5% annualized return (matching today's standard 10-year bond yield), investors receive 100% of the Bitcoin upside. Any gains beyond that are split 50/50 between the investor and the U.S. government. Importantly, principal is fully protected. Even if Bitcoin's value falls to zero, bondholders still receive their $100 face value plus interest at maturity. 'This asymmetric structure is elegant,' said Hohns. 'The government wins from interest savings even if Bitcoin goes nowhere. But if Bitcoin rises, both sides benefit. And historically, it has outperformed nearly every other asset over long time horizons.' The BitBonds proposal arrives at a moment when blockchain innovation is increasingly shaping fiscal discourse in Washington. Elon Musk recently suggested the U.S. Treasury should be 'put on the blockchain' to eliminate fraudulent payments and improve transparency. But not all crypto proponents are convinced. In a sharply worded Fortune op-ed, blockchain educator and ex-Goldman Sachs analyst Nic Puckrin cautioned against rushing into full-scale Treasury digitization: 'If anyone should support the idea of a U.S. Treasury on the blockchain, it's me … But moving the entire U.S. Treasury onto the blockchain right now would be anything short of a disaster,' he wrote, citing cybersecurity, scale, and national security risks. This is where BitBonds draw a clear line: they're not about putting the entire federal financial system on-chain but about harnessing Bitcoin's asymmetric potential within a traditional bond structure. Unlike the Musk-led vision, BitBonds do not expose sensitive government transactions to public view, nor do they rely on immature blockchain infrastructure to support trillions in transactional volume. Instead, they offer a measured, pilot-ready solution with clear upside and conservative risk exposure. Beyond institutional buyers, BitBonds are designed with the American household in mind. The white paper proposes that both interest and Bitcoin-linked gains be tax-exempt, mirroring the treatment of municipal bonds. This would create a powerful, risk-adjusted savings tool for retirement, education, or general wealth-building. 'If 132 million American households each invested $3,025,' the authors estimate, '20% of the $2 trillion BitBond issuance could be absorbed by domestic retail investors.' Even in a conservative scenario where Bitcoin grows at just 30% a year (its 10th percentile historical average) an investor could earn nearly 7% annually. If Bitcoin performs closer to its typical past rates, returns could climb to over 17% per year. And because these earnings would be tax-free, the gains could be even more valuable for American families. The Bitcoin acquired through BitBonds would be held in the Strategic Bitcoin Reserve, established under the March 2025 Executive Order. It serves not only as a long-term hedge against inflation and monetary debasement, but also as a strategic asset to reduce dependence on foreign creditors. In a 10-year scenario with even modest Bitcoin performance (e.g., 37% CAGR), the government could retain $1.77 trillion in Bitcoin upside—enough to significantly reduce national debt. Under historical median scenarios, the upside could exceed $6 trillion. Brian Estes, CIO of who penned his own BitBond white paper, emphasized this intergenerational impact in an interview with Natalie Brunell: 'If you extend this out to 20 years, the government's share of bitcoin appreciation under BitBonds could defease the federal debt entirely,' he said. 'This isn't just smart economics. It's a once-in-a-lifetime opportunity.' While BitBonds present a compelling fiscal innovation, it is important to note potential drawbacks. Although BitBond investors are guaranteed their principal and a modest fixed return, they bear the full downside risk of Bitcoin's price fluctuations. As Estes cautioned, in bear market scenarios, a low-yield BitBond could lose between 20% to 46% of its value relative to opportunity cost or inflation—making it less attractive to risk-averse or income-focused investors. Investors would benefit from 100% of Bitcoin appreciation only until their total return reaches 4.5% annually. Beyond that threshold, gains are split with the government, limiting potential returns for those seeking full exposure to Bitcoin's long-term growth. BitBonds would require the Treasury to issue approximately 11% more debt to meet the same funding needs, since 10% of each bond's proceeds would be redirected toward Bitcoin purchases. While the structure would be budget-neutral, this higher gross issuance may raise political or fiscal optics concerns. Holding billions in Bitcoin at the federal level introduces novel custody, compliance, and cybersecurity challenges. Though the proposal includes multi-signature (aka multi-sig(, cold storage, and phased rollout, the learning curve and operational complexity are far from trivial. The hybrid nature of BitBonds (combining sovereign debt with a volatile digital asset) raises significant questions about how agencies like the SEC, IRS, and CFTC might classify and regulate them. Public perception may also skew skeptical, with some viewing the initiative as speculative or ideologically driven, despite its structured, budget-neutral design. Still, proponents argue that these risks are manageable and far outweighed by the asymmetric upside. As Sigel put it, 'Worst case: cheap funding. Best case: long-vol exposure to the hardest asset on Earth.' While the idea of a fully blockchain-based Treasury may still be a moonshot fraught with technical and strategic hurdles, BitBonds may offer a grounded and actionable alternative. They don't attempt to overhaul federal infrastructure overnight. Instead, they merge the time-tested reliability of U.S. sovereign debt with the exponential potential of Bitcoin. By lowering interest expenses, building a strategic national reserve, and creating tax-advantaged savings vehicles for families, BitBonds offer a pragmatic path toward fiscal modernization, monetary sovereignty, and intergenerational equity—all without imposing new burdens on American taxpayers. As debates rage on about the digital future of money and government, BitBonds might just prove to be the middle ground: not a full-scale digital revolution, but a smart tradfi evolution.
Forbes
31-03-2025
- Business
- Forbes
Institutions Embrace Bitcoin While The UK Falls Behind
The UK has a proud history of excellence and innovation in both financial services and in computer science. But its regulatory approach to bitcoin, which sits at the intersection between these disciplines, is undermining that position. The Financial Conduct Authority has created uncertainty, driven businesses offshore, and is damaging the UK's competitiveness in digital finance. Regulatory uncertainty, restrictive policies, and a risk-averse approach have put the UK at a disadvantage as institutions elsewhere move forward. While other jurisdictions recognize Bitcoin's role in institutional finance, UK regulators have created an environment that stifles progress. The Bitcoin for Institutions event, held recently in London at The Law Society, brought together investors, policymakers, and industry leaders to assess bitcoin's growing significance. The consensus? The rest of the world is advancing while the UK remains stuck in bureaucratic inaction. Bitcoin for Institutions at The Law Society. Rob Shaw Allen Farrington, co-founder of Axiom, a bitcoin-native investment firm focused on capital deployment in the bitcoin economy, captured the shift in institutional thinking. He described bitcoin as 'forming the basis of a viable institutional asset class.' However, despite bitcoin being the best-performing asset of the decade, UK institutions remain hesitant. The FCA, tasked with ensuring financial stability, has instead become a barrier to innovation, and the result is that businesses have been driven out of the UK, driven out by regulatory hostility or simply deciding that the cost of compliance with poorly thought-out regulation is too high. While the UK stalls, the U.S. moves fast. One message was repeated throughout the event. Ignoring bitcoin is now seen as a career risk. In the U.S., pension funds, corporate treasuries, and asset managers are integrating bitcoin into their portfolios. In recent months, the largest buyers of bitcoin have not been retail investors or hedge funds, but institutional funds. Andrew Hohns, founder and CEO of Newmarket Investment Management, described the contrast, 'Many U.S. companies have started incorporating bitcoin into their financial planning, and many others are well down the road. In the UK, institutional awareness of the benefits of bitcoin is more nascent, but the topic will move closer to center stage as corporate and sovereign game theory quickly take hold." Dominic Frisby summed up the cost of inaction: "Given the potential of bitcoin, and its record, the risk is not so much owning bitcoin as not owning it." In dialogue with Izabella Kaminska, Steve Baker, who served as Minister of State in the Cabinet Office until July 2024, commented on U.S. policymakers' proactive stance, stating, 'It's great that the US is governed by a group of people who understand this.' In contrast, jurisdictions like the U.S., UAE, and Singapore are attracting capital by implementing frameworks that distinguish between bitcoin and speculative cryptoassets. The FCA has created a framework that treats bitcoin the same as speculative crypto tokens, ignoring its distinct characteristics as a decentralized monetary network. Adrian Cannon from Musqet pointed out this fundamental mismatch, "Bitcoin is revolutionary in ideas and concepts and that doesn't fit within regulation and banking." Beyond the FCA's misclassification of bitcoin, the UK's broader regulatory structure is also a barrier to institutional adoption. Baroness Claire Fox, who sits in the House of Lords, told the audience about a recent government initiative called the Regulatory Innovation Office, which was implemented with the intention of reining in regulators. However, the reality is a system of self-replicating bureaucracy, as she described a quango of regulators where no one has accountability. This structure discourages innovation, shields regulators from scrutiny, and blocks new market entrants, creating a system that protects incumbents while deterring progress. While regulators insist their approach is about protecting investors, the reality is that businesses are being forced offshore, limiting choice and harming competitiveness. Beyond regulatory concerns, institutional adoption has also been slowed by misconceptions about bitcoin's environmental impact. Discussions at the event highlighted how bitcoin is being used to stabilize energy grids, reduce waste, and improve sustainability. One panel on social benefits discussed bitcoin's growing role in advancing financial inclusion and human rights - and the fintech products being built to enable this. In regions affected by financial repression, bitcoin is being used to bypass restrictions, support activist movements, and provide stable value transfer in fragile economies. In areas with poor access to banking, whether in sub-Saharan Africa, Afghanistan, or refugee communities, bitcoin offers a way to receive donations, store value, and operate independently from centralised financial institutions. Recent data indicates that over 50% of bitcoin mining is now powered by renewable energy sources. Miners are increasingly co-locating with wind, solar, and hydro projects, acting as flexible demand-response partners and absorbing excess energy when supply outpaces demand and powering down during peak consumption to relieve pressure on the grid. In the UK, this model could deliver substantial savings, especially given that electricity prices here are among the highest in the world. Reducing energy costs could offer a vital boost to both households and businesses facing mounting bills. According to the National Grid ESO, curtailment of wind power alone cost British consumers over £800 million in 2023, as renewable generators were paid to shut down during periods of oversupply, with the tab being picked up by households. If this curtailed energy were redirected to bitcoin mining, an approach already implemented in parts of the U.S., Scandinavia, and Africa, it would reduce these costs and provide an additional revenue stream for renewable operators. Instead of paying producers to switch off, excess energy could be monetised in real-time, and customers would see immediate savings on their bills. Bitcoin mining is also being used to capture vented methane from oil fields and repurpose landfill gas into electricity, turning environmental liabilities into economic opportunities. These developments challenge legacy thinking and position bitcoin as an energy solution. The discussion repeatedly returned to one key issue, namely that the UK is falling behind. While British firms continue debating whether bitcoin should be included in institutional portfolios, U.S. asset managers and corporate treasurers are already executing their bitcoin strategies. Dominic Frisby captured the financial risk of inaction, "The risk is not owning it." At the same time, institutional investors in the U.S. and elsewhere are increasing their exposure. In recent months, institutional funds have been the largest single buyer of bitcoin. This shift was largely due to BlackRock and Fidelity launching U.S.-approved bitcoin ETFs in early 2024, an institutional milestone that the UK has yet to match. What's more, President Donald Trump signed an executive order in early March 2025 to establish a Strategic Bitcoin Reserve, positioning bitcoin as a strategic asset within the U.S. financial system. The tension between legacy finance and emerging alternatives was clear throughout the event, which was described as a clash between Wall Street and Main Street. The real risk for the UK is not that bitcoin will fail but that it will succeed elsewhere and leave the UK institutions scrambling to catch up. If the UK wants to remain a serious player in global finance, it needs to adapt before the next wave of innovation settles elsewhere. Baroness Claire Fox offered a blunt assessment of the current state of affairs and the path to change, 'Rebellion is the way forward.' The Bitcoin for Institutions event clearly demonstrated an unavoidable truth: that UK institutions must act. Regulatory paralysis is not stopping bitcoin's adoption. It is simply pushing progress elsewhere. While the U.S., UAE, and Singapore create supportive policies, the UK remains locked in bureaucratic complexity. Without a course correction, UK financial firms will be left behind in the next phase of institutional finance. Bitcoin is no longer an emerging trend, it is a financial transformation already in motion. And transformations do not wait for governments and regulators to catch up.
