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.”

What Are 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.

Taking Cues From Saylor’s Strategy

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.

How BitBonds Could Fix The National Debt

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.”

A “Win-Win-Win”

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.