The current debt issue in the United States is gradually evolving into a global economic challenge. As of 2024, the total federal debt of the United States has exceeded $35 trillion, accounting for as much as 125% of the Gross Domestic Product (GDP). Such a high level of debt has sparked widespread discussion about its long-term sustainability.
At the same time, cryptocurrencies are seen by some as an innovative tool that may alleviate debt pressure, especially in the context of Bitcoin being proposed as a reserve asset. So, can cryptocurrencies play a key role in this predicament?
In this regard, former U.S. House Speaker Paul Ryan published a compelling article discussing how cryptocurrencies, particularly stablecoins, might help the U.S. address its massive debt problem in the future. Ryan believes that the national debt of the U.S. has already threatened the status of the dollar as the global reserve currency. In this context, the rise of stablecoins may provide new buyers for U.S. debt, thereby delaying the onset of a crisis.
Latest data shows that dollar-based stablecoins like USDT (Tether) and USDC (USD Coin) hold a significant position in U.S. Treasuries, with these stablecoins currently holding over $95 billion in U.S. debt. This means that as stablecoins continue to grow, they not only provide traders with a channel for fiat currency to enter the crypto market but also may help absorb U.S. debt through ongoing demand for Treasury bonds.
China was once a major buyer of U.S. debt, but in recent years its holdings have decreased from $1.27 trillion in 2013 to less than $1 trillion by April 2022. Experts analyze that changes in geopolitical conditions and shifts in trade policy are the main reasons for China's reduction in U.S. debt holdings. In this situation, stablecoin issuers as buyers of Treasury bonds can reduce reliance on traditional buyers, thereby alleviating concerns caused by geopolitical instability.
For example, according to a recent report by Tether, the company holds $84.548 billion in U.S. government debt, while Circle's report shows it holds $11.127 billion in Treasury bonds. This indicates that stablecoin issuers are gradually becoming significant buyers of U.S. Treasuries.
Furthermore, Ryan pointed out that the position of the U.S. dollar as the global reserve currency is facing risks. As foreign interest in U.S. Treasury bonds gradually declines, borrowing costs for the U.S. may rise, potentially impacting overall economic stability. The rise of stablecoins may help mitigate this crisis to some extent, especially before more measures are expected to address the debt issue.
However, the acceptance of stablecoins and their integration into the traditional financial system is not without controversy. Opponents argue that this could lead to a loss of U.S. control over global capital flows. Stablecoins are issued on permissionless public blockchains, reflecting America's values of freedom and openness, which stands in stark contrast to China's digital financial infrastructure.
According to a report from the Hoover Institution (Digital Currency: The Crossroads of America, China, and the World), the U.S. should actively lead the future of digital currencies. Although the report does not advocate for the creation of a digital dollar, it emphasizes the urgency of establishing regulatory standards to address China's leading position in the digital currency space. The transformation of the U.S. digital economy will rely more on stablecoins, and drafting necessary regulations and implementing infrastructure will be key to ensuring success.
The report states that coordinating with G7 countries and other democratic partners to establish principles and standards for a global digital financial system is an important step in restoring U.S. economic influence. Through such collaboration, stablecoins have the potential to help the U.S. regain its status as a superpower.
Besides stablecoins, Ryan also mentioned the potential role of Bitcoin. U.S. Senator Cynthia Lummis officially proposed a Bitcoin bill in July 2024, suggesting the establishment of a national Bitcoin reserve holding 1 million Bitcoins to serve as a store of value, thereby enhancing the U.S. balance sheet. Lummis claimed that if profits were made from the sale of Bitcoin, the U.S. could achieve a debt-free status within 20 years.
However, data analysis reveals that achieving this goal is not optimistic. The current national debt of the United States stands at $35.46 trillion, while the market capitalization of Bitcoin is only $1.739 trillion. To pay off the national debt with 1 million Bitcoins, each Bitcoin would need to be valued at $35.46 million. Considering the total Bitcoin supply is limited to 21 million, the growth rate of market capitalization is unlikely to keep pace with the total value of world assets such as gold, silver, and stocks.
Nevertheless, asset management company VanEck, which has issued multiple cryptocurrency ETFs, is optimistic that if the price of Bitcoin grows at a compound annual growth rate (CAGR) of 25% per year, it could reach $42.3 million by 2049. Meanwhile, U.S. debt could grow at a rate of 5% annually, increasing from $37 trillion at the beginning of 2025 to $119.3 trillion. If a national reserve of 1 million Bitcoins can be achieved, these assets could account for 35% of the national debt by 2049, potentially offsetting up to $42 trillion in liabilities.
In addition, Michael Saylor, the founder of MicroStrategy, the leading Bitcoin holder among U.S. listed companies, stated that he has met with many in the incoming administration, and Trump is serious about establishing a national Bitcoin reserve. If you know where the funds are going, you should boldly invest in the future.
Meanwhile, the price of Bitcoin has seen a significant increase in recent weeks, reaching a historical high of $108,353 on December 17, 2024, boosting market confidence in its further rise. Analysts believe that Bitcoin could even break the $150,000 mark during Trump's presidency. For investors, paying attention to policy changes and market dynamics will be key to navigating future volatility in the cryptocurrency market. If Bitcoin's potential can be fully unleashed, the target of $150,000 may just be the starting point of its long-term value.
Currently, there are no clear signs that the U.S. will incorporate cryptocurrencies into its debt crisis resolution plan in the short term, but the discussion itself reflects that the importance of cryptocurrencies in the global economy is rapidly increasing. If the U.S. government can establish a clear policy framework that integrates the advantages of cryptocurrencies with the traditional financial system, it may not only help alleviate debt pressure but also lead the future development of the global digital economy.
In summary, against the backdrop of an increasingly severe debt crisis in the U.S., cryptocurrencies may offer a breakthrough solution. However, this requires a collaborative effort from policy, market, and technology. In the coming years, regardless of whether Bitcoin can become the antidote to the U.S. debt issue, its role in the global economy will undoubtedly become more important.
