VanEck Proposes Bitcoin-Linked Treasuries to Offset $14 Trillion US Debt

On April 16th, it was reported that Matthew Sigel, Head of Digital Asset Research at VanEck, proposed a new debt instrument called "BitBonds," which combines US Treasuries with Bitcoin exposure as a new strategy to manage the government's upcoming $14 trillion refinancing need.

This concept was introduced at the Strategic Bitcoin Reserve Summit, aiming to address the sovereign funding needs and investors' demand for inflation protection. The BitBonds would be designed as 10-year securities composed of 90% traditional US Treasury exposure and 10% Bitcoin, with the Bitcoin portion funded by proceeds from the bond sales. Upon maturity, investors would receive the full value of the US Treasury component, i.e., $90 for every $100 bond, plus the value of the Bitcoin allocation.

Additionally, investors would gain all the upside from Bitcoin until their yield reaches 4.5%. Any gains beyond this threshold would be split between the government and bondholders. Sigel stated that for investors who believe in Bitcoin, BitBonds would be a "convex bet," as the instrument would provide asymmetric upside potential while retaining a layer of risk-free return.

However, its structure implies that investors would bear all the downside risks associated with Bitcoin exposure. Previously, the Bitcoin Policy Institute (BPI) proposed issuing Bitcoin bonds (BitBonds) to assist in repaying US national debt.