A financial proposal that combines Bitcoin and government bonds to strengthen the United States’ economic position.
The Bitcoin Policy Institute has presented a proposal that could increase the United States’ Bitcoin reserves without burdening taxpayers: the “BitBonds,” government bonds enhanced with Bitcoin.
The policy paper, co-signed by Andrew Hohns, founder and CEO of Newmarket Capital and Battery Finance, and Matthew Pines, Executive Director of the Bitcoin Policy Institute, presents BitBonds as “an idea whose time has come.” These bonds could directly implement Trump’s directive, reducing the interest burden on government bonds while simultaneously increasing the country’s Bitcoin reserves.
On March 6, Trump signed an executive order to establish a strategic reserve using Bitcoin already held by the federal government, seized during criminal or civil proceedings. According to K33 analysts, the reserve is expected to initially include around 103,500 BTC, as 94,636 BTC seized from Bitfinex hackers are likely to be returned to the exchange.
The executive order also tasked Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick with developing cost-free strategies to acquire more Bitcoin without generating additional costs for American taxpayers.
The BitBonds mechanism
BitBonds would work as follows:
- Reduced interest rate: BitBonds would offer an annual interest rate of 1% in dollars, lower than the 4.5% offered by standard government bonds. This saving is the main benefit for the government.
- Fund allocation: for every $100 raised, $90 would go to normal government financing, and $10 would be used to buy bitcoin for the strategic reserve.
- Bitcoin-linked return: in exchange for the lower interest rate, investors would receive additional returns based on bitcoin’s performance. At bond maturity, they would receive:
- Full principal repayment.
- Fixed interest earned (1% annual).
- A share of Bitcoin’s performance.
- Profit-sharing mechanism: investors would receive 100% of bitcoin gains up to a certain compounded annual return threshold, and 50% of gains beyond that threshold. The government would keep the remaining share.
The authors of the paper stated:
“By leveraging America’s position as a global financial and technology leader, BitBonds offer multiple mechanisms to reduce the overall debt burden while strengthening the nation’s strategic position in the evolving monetary landscape.”
BitBonds as a solution to US fiscal challenges
The Bitcoin Policy Institute also proposes BitBonds as a solution to the United States’ fiscal challenges, particularly the need to refinance trillions of dollars of debt in the coming years. The authors said:
“The United States faces an unprecedented fiscal challenge with approximately $9.3 trillion of federal debt maturing within the next 12 months. This substantial refinancing requirement, combined with prevailing market interest rates approaching 4.5%, creates significant ongoing costs to service this debt. These costs place an extraordinary burden on taxpayers and substantially constrain the government’s fiscal flexibility and economic growth potential.”
According to the authors, BitBonds could generate “immediate fiscal relief.” By lowering interest rates on government bonds, the government could save billions of dollars every year, with estimates up to $700 billion in savings over ten years.
“Detailed financial analysis indicates that implementation of the BitBonds program at the proposed scale of $2 trillion (approximately 20% of 2025 refinancing needs) could generate annual interest savings of $70 billion compared to conventional Treasury issuance,” they stated.
Financial projections
Performance-based models indicate that, even if bitcoin prices remain flat over the 10-year bond maturity, the US would save approximately $354 billion in present value terms, after subtracting the $200 billion allocated to Bitcoin from the projected $554.4 billion in interest savings.
To mitigate market disruption, the government would acquire the $200 billion in bitcoin through a staggered dollar-cost averaging approach and diversified execution channels.
Custody plans would include multi-signature cold storage systems and a dedicated security infrastructure managed by a specialized Treasury unit.
Additional benefits of BitBonds
Among the additional benefits of BitBonds, the authors highlight a reduction in national debt assuming Bitcoin continues to appreciate over time, a rapid expansion of the strategic reserve without additional costs to taxpayers, and favorable tax returns for American families.
