• 16 April 2025
• |
• 09:00

VanEck’s digital asset strategist Matthew Sigel has floated a bold concept that blends traditional finance with crypto: sovereign bonds partially backed by Bitcoin.

These “BitBonds” aim to reimagine how the U.S. could manage its massive refinancing obligations by combining conventional Treasuries with a dash of digital asset exposure—an unconventional move designed to attract yield-seeking investors while easing government borrowing costs.

The idea is simple in structure but layered in implication. Each bond would consist of 90% U.S. Treasury holdings and 10% Bitcoin, with the BTC portion acquired using funds from the bond sale itself. Investors would be guaranteed the Treasury payout at maturity, while the Bitcoin segment would fluctuate based on market performance. Gains from Bitcoin would belong entirely to investors up to a 4.5% return; any excess would be shared between bondholders and the government. Losses, however, wouldn’t be shared—investors would shoulder the full downside of the crypto allocation.

Sigel framed the instrument as a way to align divergent interests: governments need cheaper debt, and investors want inflation-resistant assets with long-term upside. Projections show that the product could be particularly attractive if Bitcoin continues its historical trend of aggressive growth. For example, with a 1% coupon, investors could see outsized returns if Bitcoin grows at even a moderate rate—but they could also suffer steep losses if BTC underperforms.

From the government’s point of view, issuing BitBonds could help reduce interest payments, especially when BTC’s performance is neutral or mildly positive. Even in a flat crypto market, the lower fixed rates of these bonds could save billions in debt servicing. The Treasury would only face losses in scenarios where high-coupon BitBonds are issued and Bitcoin tanks—an outcome deemed less likely by proponents.

Still, the proposal isn’t without friction. Investors may balk at the downside asymmetry, and the logistics of issuing debt partially denominated in crypto create new complications. Sigel has acknowledged that design improvements—such as limited downside protection—may be necessary to make the product viable. But as a concept, BitBonds signal growing interest in merging traditional fiscal tools with the digital economy’s more volatile, but promising, frontiers.

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