In a keynote speech at the Bitcoin For America event hosted by the Bitcoin Policy Institute (BPI) on March 11, Andrew Hohns, CEO of Newmarket Capital, laid out a thought experiment for a new type of treasury instrument he calls “Bit Bonds.” Hohns presented a framework in which the United States could simultaneously lower borrowing costs, create a significant national Bitcoin reserve, and potentially defease future debt obligations—all within a single bond issuance of up to $2 trillion.
Remarkably, the proposal comes just a few days after US President Donald Trump announced the strategic Bitcoin reserve (SBR) by executive order. The order is known to contain a sentence instructing the Secretary of the Treasury and Commerce to find “budget-neutral” ways to buy BTC.
Bitcoin Bonds
According to Hohns, the mechanism behind Bit Bonds involves dedicating 10% of the issuance proceeds—$200 billion out of a $2 trillion issue—to purchase BTC. The remaining 90% would fund regular government expenditure. The bonds would carry a lower current pay interest rate of 1% for the first 10 years, offset by a final payout structure that gives bondholders both a guaranteed annualized return (4.5% on a senior basis) and a share of any BTC price appreciation.
“$2 trillion bond issuance, 10% of the bonds go for the purchase of Bitcoin, 90% go for other government purchases,” Hohns explained, emphasizing that the government itself would retain half of any gains from Bitcoin’s price increase.
The plan hinges on Bitcoin’s historical compound annual growth rates (CAGRs). Hohns said he believes that, if the asset continues to grow at even the more modest rates observed in its past, the upside could be transformative for both investors and the US Treasury.
From Hohns’ perspective, one of the immediate benefits of issuing these Bit Bonds at a lower coupon rate is the reduction of the federal government’s interest expense: “The current US 10-year rate is roughly 4.5%. The proposed rate for the BitBond is 1%, which is a 3.5% annual savings, or $70 billion on $2 trillion of total issuance. Over 10 years, that’s $700 billion.”
Even after accounting for the $200 billion spent on Bitcoin, Hohns calculated a net present value (NPV) saving of $354 billion. He contends that this structure is “revenue-neutral,” meaning the overall cost to taxpayers would be offset by the lower interest burden.
Hohns also stressed the potential for significant gains if Bitcoin’s price appreciates as it has in past market cycles. Citing historical four-year growth rates at various percentiles, he noted that the US government’s portion of Bitcoin gains could “defease the federal debt” if Bitcoin’s performance meets or exceeds long-term bullish projections.
In addition to savings on federal debt servicing, Hohns argued that reducing the 10-year rate to 1% for this tranche of issuance could “ripple through the rest of the Treasury market” and help bring down borrowing costs for mortgages, auto loans, and small business financing. He also framed Bit Bonds as a possible tool for everyday Americans to build wealth:
“For American families, I would like to propose that the Bit Bonds be free of income tax and free of capital gains tax in order to put a tremendous tool for savings in the hands of everyday Americans.”
Hohns gave an example in which 20% of the $2 trillion issuance is taken up by American households. Each family’s share (approximately $2,900) would appreciate on a tax-exempt basis, delivering compound growth if BTC’s performance meets historical levels.
While Hohns’ proposal is, in his own words, still a “thought experiment,” its breadth and ambition caught the attention of attendees at the Bitcoin For America event. He concluded by emphasizing the triple benefits that could be achieved—lower government interest costs, a sizable SBR, and the possibility of enhanced savings for citizens.
“In summary, BitBonds are a win-win-win,” Hohns said. “I would love to see this adopted by the Treasury and by Congress.”
At press time, BTC traded at $82,495.
Featured image created with DALl.E, chart from TradingView.com
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