- Proposed Bit Bonds to help reduce national debt and fund Bitcoin reserve.
- Bonds offer 1% interest with Bitcoin-linked returns for investors.
- U.S. aims to integrate Bitcoin into sovereign finance by 2035.
The Bitcoin Policy Institute has developed an innovative framework to minimize the U.S. national debt through Bitcoin-Enhanced Treasury Bonds. The plan recommends that the U.S Treasury should issue $2 trillion worth of Bit Bonds. The proposal aims to reduce federal debt and enable institutional and retail investors to access exposure to Bitcoin.
Bit Bond Proposal
The proposed Bit Bonds structure will redirect 90% of proceeds to finance the federal budget. The plan devotes 10% of the proceeds to Bitcoin purchases for the Strategic Bitcoin Reserve without additional burden to taxpayers. This approach helps the U.S. government control debt and create long-term value through Bitcoin price appreciation.
The proposed bond issuance delivers 1% annual interests rates which are much lower than current Treasury bonds. Investors who accept low returns will obtain access to Bitcoin-linked profit when the bond matures. Investors will get 100% of Bitcoin gains up to fixed annual return limit while the government will retain any excess gains.
Under a stable Bitcoin market the Treasury could save up to $354 billion at the current market value. The potential of Bitcoin’s value appreciation could reduce a substantial amount of the national debt by 2045. This framework provides avenues to decrease substantial debt without increased taxation or reduction in public expenditure.
Tax-Exemption Benefits
The Bit Bonds framework proposes tax exemptions on bond interest and returns earned from Bitcoin value appreciation. This makes these bonds more attractive to drive retail investor participation. The policy framework indicates that 132 million U.S households could invest an average of $3,025 each.
Institutional investors and foreign buyers are expected to purchase 80% of these bonds. The other 20% would be allocated to the U.S. household sector. The allocation mechanism ensures broad investor participation and supports large scale institutions.
The Bit Bonds rollout consists of three defined phases. The first phase consists of a pilot operation to issue $5 billion to $10 billion bonds. The next phase includes a legislative action and full integration into the Treasury’s standard bond issuance schedule.
Strategic Bitcoin Reserve Framework
The government will purchase Bitcoin through dollar-cost averaging from different sources to reduce potential price volatility. Moreover, the proposal includes secure custody protocols and regulatory coordination to define its classification of these bonds under securities and tax laws.
The Bitcoin-enhanced bond initiative follows executive Order 4201 issued by President Trump in March 2025. The executive order classified Bitcoin as “digital gold” and created a framework to expand the U.S government’s Bitcoin reserves. This proposal expands these reserves through public bond sales without additional taxes.
The projected U.S. Bitcoin reserve growth indicates it will achieve trillions in value by 2035. Under most conservative predictions the government-held portion could exceed the current U.S. gold reserves. The Bit Bond initiative positions the United States a pioneer in Bitcoin-based sovereign finance and financial stability.