Andrew Hohns, CEO of Newmarket Capital, proposes the idea of integrating Bitcoin into government bonds as a strategy to alleviate national debt while also acquiring Bitcoin for the U.S. strategic reserve.
During the Bitcoin Policy Institute’s Bitcoin for America event on March 11, Hohns put forward the concept of “Bit Bonds,” a unique form of U.S. Treasury bond that incorporates Bitcoin into government financing. The aim is to utilize bond issuance to lower government borrowing expenses and establish a strategic Bitcoin reserve, all while presenting American families with a tax-exempt investment option.
Hohns suggested that the U.S. government could issue approximately $2 trillion in Bit Bonds, with 90% of the funds directed toward government purchases and 10% allocated for acquiring Bitcoin. Essentially, for every $100 raised, about $10 would be invested in BTC.
“If there is a $2 trillion issuance right from the start, it would translate to $200 billion worth of Bitcoin at a price of $90,000 per BTC. That results in 2.22 million Bitcoin. Naturally, the price may vary, and we might acquire a different amount than that,” Hohns noted during his talk.
According to him, these bonds would empower the U.S. federal government to obtain $200 billion in Bitcoin while simultaneously saving $554 billion on interest over 10 years. This would be due to Bit Bonds offering a substantially lower interest rate of 1% annually, in comparison to the 4.5% associated with U.S. Treasuries, resulting in significant reductions in interest payments.
Additionally, Hohns indicated that Bit Bonds would attract foreign investors since they could be used as eligible collateral for various swap and derivative transactions. He mentioned that investors might expect a 4.5% compound annual growth rate on a senior basis, which aligns with current Treasury yields.
Once investors receive this fixed return, they are entitled to a 50% share of any upside realized from the Bitcoin acquisition, while the U.S. government would retain the remaining 50%. Given Bitcoin’s performance, potential returns for investors could be quite impressive, ranging from nearly 7% to as much as 17% annually on a tax-free basis.
“This would generate a government entitlement of Bitcoin valued at slightly over $50.8 trillion, which corresponds to the anticipated size of the funded federal debt by 2045. In essence, this approach puts us in a position to address the federal debt,” Hohns explained.
Moreover, he advocated that Bit Bonds should also be accessible to American citizens, describing them as a “potent tool against inflation.” He argued that as a savings instrument, these bonds should be exempt from income tax and capital gains tax for the American public.
He estimated that a family could invest $2,900 and expect a yield of between 7% and 17% over a decade, depending on Bitcoin’s value over the years.