Matthew Sigel, Head of Digital Assets Research at VanEck, has proposed a new financial instrument, “BitBonds,” to help manage the US government’s looming $14 trillion refinancing debt requirement.
The 10-year financial instrument combines traditional US Treasury bonds with Bitcoin (BTC) exposure. This offers a potential solution to the nation’s fiscal concerns.
Can Bitcoin-Backed Bonds Help Solve the US Debt Crisis?
According to Sigel’s proposal, BitBonds’ investment structure allocates 90% of the funds to low-risk US Treasury securities and 10% to Bitcoin, combining stability with the potential for higher returns. Additionally, the government would purchase Bitcoin with proceeds from the bond sale.
BitBonds’ Proposed Structure by VanEck. Source: X/Matthew Sigel
Investors would receive all Bitcoin gains up to a maximum annualized yield-to-maturity of 4.5%. Furthermore, the investor and the government would split any additional gains equally.
“An aligned solution for mismatched incentives,” Sigel remarked.
From an investor perspective, Sigel highlighted that the bond offers a breakeven Bitcoin compound annual growth rate (CAGR) between 8% and 17%, depending on the coupon rate. Additionally, investors’ returns could skyrocket if Bitcoin grows at a 30%–50% CAGR.
“A convex bet—if you believe in Bitcoin,” he added.
However, the structure is not without risks: investors bear Bitcoin’s downside while only partially participating in its upside. Lower-coupon bonds may lose appeal if Bitcoin underperforms.
Meanwhile, the Treasury’s downside is limited. Even a complete collapse of Bitcoin’s value would still result in cost savings compared to traditional bond issuance. Yet, this is contingent on the coupon remaining below the breakeven threshold.
“BTC upside just sweetens the deal. Worst case: cheap funding. Best case: long-vol exposure to the hardest asset on Earth,” Sigel stated.
Sigel claimed that this hybrid approach aligns the interests of the government and investors over a 10-year period. The government faces high interest rates and significant debt refinancing needs. Meanwhile, investors seek protection from inflation and asset debasement.
The proposal comes amid growing concerns over the US debt crisis, exacerbated by the recent increase in the debt ceiling to $36.2 trillion, as reported by BeInCrypto. Notably, the Bitcoin Policy Institute (BPI) has also endorsed the concept.
“Building on President Donald J. Trump’s March 6, 2025, Executive Order establishing the Strategic Bitcoin Reserve, this white paper proposes that the United States adopt Bitcoin-Enhanced US Treasury Bonds (“₿ Bonds” or “BitBonds”) as an innovative fiscal tool to address multiple critical objectives,” the brief read.
In the paper, co-authors Andrew Hohns and Matthew Pines suggested that issuing $2 trillion in BitBonds at a 1% interest rate could cover 20% of the Treasury’s 2025 refinancing needs.
“Over a ten-year period, this represents nominal savings of $700 billion and a present value of $554.4 billion,” the authors wrote.
BPI estimates that if Bitcoin achieves a CAGR of 36.6%, the upside could potentially defease up to $50.8 trillion of federal debt by 2045.
These recommendations are part of broader conversations regarding Bitcoin’s potential impact on national finance. Previously, Senator Cynthia Lummis argued that a US Strategic Bitcoin Reserve could halve the national debt. In fact, VanEck’s analysis indicated that such a reserve could help reduce $21 trillion of debt by 2049.
