Key Points
- Newmarket Capital CEO, Andrew Hohns, proposes the integration of Bitcoin into US government bonds to lower national debt and build a Bitcoin reserve.
- The concept of “Bit Bonds” would offer a tax-free investment opportunity for American families and could potentially save the government billions in interest expenses.
Andrew Hohns, CEO of Newmarket Capital, has floated the idea of integrating Bitcoin into US government bonds.
Hohns believes that this approach could help decrease the national debt and simultaneously establish a strategic Bitcoin reserve for the United States.
Bit Bonds: A Novel Proposal
The innovative concept was proposed by Hohns at the Bitcoin Policy Institute’s Bitcoin for America event on March 11.
He suggested the creation of “Bit Bonds”, a unique type of US Treasury bond that would incorporate Bitcoin into government financing.
The plan would use bond issuance to lower government borrowing costs, build a strategic Bitcoin reserve, and provide American families with a tax-free investment option.
Hohns proposed that the US government issue around $2 trillion in Bit Bonds, with 90% of the funds allocated for government purchase and 10% used to buy Bitcoin.
This would mean that for every $100, approximately $10 would be allocated to Bitcoin.
Potential Benefits of Bit Bonds
According to Hohns, the introduction of Bit Bonds could enable the US federal government to acquire $200 billion worth of Bitcoin, while simultaneously saving the government $554 billion in 10-year interest rates.
This is due to the fact that Bit Bonds offer a significantly lower interest rate of 1% per year, compared to the 4.5% interest rate of traditional US Treasuries.
Hohns also believes that Bit Bonds could become an attractive investment for foreign investors, as they could serve as eligible collateral for a variety of different swap and derivative arrangements.
Investors could potentially receive a 4.5% compound annual growth rate on a senior basis, which aligns with current Treasury yields.
After earning this fixed return, investors would receive a 50% share from the upside of the Bitcoin purchase, while the remaining 50% would go to the US government.
Depending on Bitcoin’s performance, the total returns for investors could be quite attractive, ranging from nearly 7% to as high as 17% annually on a tax-free basis.
Hohns further suggested that Bit Bonds should be made available to American citizens as a powerful tool to defend against inflation.
As a savings instrument, Hohns proposed that the bonds should be free of income tax and capital gains tax for the American people.
He estimated that a family could invest $2,900 and receive a yield of 7% to 17% over a 10-year period, depending on Bitcoin’s performance throughout the years.