The proposal to establish Bitcoin reserves by the senator has sparked heated discussion.
The U.S. national debt has ballooned to about $35 trillion (approximately NT$1,050 trillion). To address this, Wyoming Senator Cynthia Lummis proposed a plan to establish a strategic Bitcoin reserve to help eliminate federal debt. In July, she introduced the Bitcoin Bill, suggesting that the government purchase 1 million Bitcoins, about 5% of the total supply of Bitcoin, and hold them for at least 20 years. Additionally, she called for the U.S. Treasury to convert part of its gold reserves (about 8,000 tons, valued at approximately $448 billion) into Bitcoin.
Experts question whether Bitcoin can solve the debt problem.
However, Avik Roy, president of the non-profit think tank Foundation for Research on Equal Opportunity, expressed skepticism. He pointed out at the 2024 North American Blockchain Summit held in Dallas, Texas on November 20 that this idea exaggerates the role of Bitcoin. He stated:
"Senator Cynthia Lummis talked about how Bitcoin reserves could help us eliminate federal debt, which is an overhyped capability of Bitcoin."
Source of the image: (Cointelegraph) Avik Roy (left) speaking at the 2024 NAB Summit on November 20.
Roy explained that even if the U.S. buys a large amount of Bitcoin and expects its value to rise, it cannot keep up with the debt that has reached $35.46 trillion, which has almost grown exponentially since the 1980s. He emphasized:
"Bitcoin reserves are good, but they cannot solve the problem; we still need to implement budget reform to eliminate the annual $2 trillion federal deficit."
Bitcoin reserves may alleviate pressure on the bond market.
Despite skepticism about whether Bitcoin can solve the debt problem, Roy stated that Bitcoin reserves could help ease tensions in the bond market. He said: "At the very least, we have the capability to support some dollars with Bitcoin, making the bond market feel that the U.S. will not go bankrupt." However, he also worries that, like the way the U.S. handled its gold reserves in the 1970s, the government might erode Bitcoin reserves.
According to data from the U.S. Treasury, since 1981, the U.S. national debt has increased from $3.81 trillion to $35.46 trillion at a compound annual growth rate of 5.3%. Roy emphasized that merely relying on Bitcoin reserves cannot reverse this trend; practical budget reform measures must be taken.
Experts call for a rational view of Bitcoin's role.
Overall, experts believe that while Bitcoin, as an emerging digital asset, has potential financial innovation value, viewing it as a panacea for America's massive debt is undoubtedly an exaggeration of its capabilities. Roy suggested that the government should focus on substantial fiscal reform rather than rely on digital assets like Bitcoin to fill fiscal gaps. He called for: "We need practical budget reforms to eliminate the annual $2 trillion federal deficit."
Although the rise in Bitcoin prices has attracted the attention of global investors, experts remind that Bitcoin's role in national finance should be viewed rationally to avoid over-reliance or overly high expectations.
[Disclaimer] The market has risks, and investment requires caution. This article does not constitute investment advice; users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Responsibility lies with the investor.
‘Can the U.S. debt crisis be solved with Bitcoin? Experts: Overhyping BTC, budget reform is the solution’ was first published on ‘Crypto City’
