Bitcoin-backed bonds proposed to help refinance $14 trillion US debt

A new proposal suggests the US could use Bitcoin-backed (CRYPTO:BTC) Treasury bonds to help refinance $14 trillion in maturing federal debt over the next three years, according to VanEck’s head of research, Matthew Sigel.

Sigel introduced the concept of “BitBonds” at the Strategic Bitcoin Reserve Summit 2025, outlining a hybrid bond structure composed of 90% traditional government debt and 10% Bitcoin exposure.

“Interest rates are relatively high versus history. The Treasury must maintain continued investor demand for bonds, so they have to entice buyers,” he explained.

The proposed 10-year BitBonds would offer investors a $90 premium plus the value of the Bitcoin component, with gains split between the government and the bondholder if returns exceed a 4.5% annualised yield.

“If Bitcoin gains are big enough to provide that above a 4.5% annualised yield, the government and the bond buyer split the remaining gains 50 over 50,” Sigel noted.

Even if Bitcoin were to lose all its value, Sigel argued that the government would still save money by issuing BitBonds at lower coupon rates compared to current market rates.

“The same thing if the coupon is sold at 2%, Bitcoin can go to zero, and the government still saves money versus the current market rate of 4%. And it’s in these 3% to 4% coupons where Bitcoin has to work in order for the government to save money,” he said.

This approach is designed to appeal to investors seeking protection from inflation, as Bitcoin is increasingly viewed as a hedge against both US dollar and asset inflation.

The idea of Bitcoin-enhanced Treasury bonds has also been supported by the Bitcoin Policy Institute, which estimates the program could generate up to $70 billion in annual interest savings and $700 billion over a decade.

“The Executive Order recognised bitcoin as a strategic reserve asset—akin to digital gold—and authorized the Secretaries of Treasury and Commerce to develop budget-neutral strategies for acquiring additional bitcoin without imposing costs on American taxpayers,” according to a report from the Institute.

At the time of reporting, the Bitcoin (BTC) price was $84,375.26.