🌎 Paul Ryan: Cryptocurrencies Could Alleviate U.S. Debt Crisis

Crypto Could Stave Off U.S. Debt Crisis, Says Paul Ryan

Former House Speaker Paul Ryan, in a recent op-ed, suggests that cryptocurrencies might help mitigate the U.S. debt crisis. With America’s debt climbing to $35.46 trillion, Ryan warns that the U.S. dollar’s status as the global reserve currency is under threat. One potential solution he sees is the use of stablecoins to purchase U.S. debt.

Stablecoins as a Source of Demand for U.S. Debt

Stablecoins like USDT (Tether) and USDC (USD Coin) collectively hold over $95 billion in U.S. Treasury bills, according to their recent reserve reports. As stablecoins continue to gain traction, they could play a pivotal role in absorbing U.S. debt through a consistent demand for treasury bills.

China, traditionally a major buyer of U.S. debt, has reduced its holdings from $1.27 trillion in 2013 to under $1 trillion since April 2022. This reduction is attributed to geopolitical concerns and evolving trade policies. The rise of stablecoin issuers as purchasers of treasury bills can help reduce reliance on traditional buyers and mitigate concerns over geopolitical instability.

For instance, Tether’s October 31, 2024, report indicates that the stablecoin issuer holds $84.548 billion in U.S. government debt. Similarly, Circle’s November 12 report shows $11.127 billion in treasury bill holdings.

“The dollar’s status as a global reserve currency is at risk due to dwindling foreign interest,” Ryan notes, warning that this could impact the U.S.’s ability to borrow cheaply and maintain economic influence.

Hoover Institution Report: U.S. Should Lead in Digital Currency

One argument against integrating stablecoins into the traditional financial system is the perceived loss of control over global fund flows and the ability to impose sanctions. However, dollar-backed stablecoins, issued on public, permissionless blockchains, reflect American values of freedom and openness, contrasting with China’s digital financial infrastructure.

A Hoover Institution report titled “Digital Currencies: The U.S., China, And The World At A Crossroads” emphasizes China’s first-mover advantage with its central bank digital currency. The report suggests that while the U.S. need not create a digital dollar, it must urgently develop standards to counter China’s growing influence. Transitioning to a digital economy through stablecoins requires the establishment of regulatory frameworks and infrastructure.

The report outlines steps such as coordination with G7 nations and other democratic partners to establish principles and standards for global digital finance. With the right policies, stablecoins could help the U.S. regain its economic influence.

Could Bitcoin Solve the U.S. National Debt Problem?

In July 2024, U.S. Senator Cynthia Lummis introduced the Bitcoin Act, proposing the creation of a national Bitcoin reserve with 1 million BTC tokens to bolster America’s balance sheet. While Lummis claims this could make the U.S. debt-free within 20 years, the math suggests otherwise. With the national debt at $35.46 trillion and Bitcoin’s market capitalization at $1.739 trillion, each BTC would need to be valued at $35.46 million to pay off the debt.

Despite its limited supply of 21 million tokens, Bitcoin’s market capitalization is currently higher than silver. It is improbable for its market capitalization to outpace the combined value of global assets such as gold, silver, and stocks.

Bitcoin’s recent surge to $93,265 on November 13 has boosted investor confidence, with some predicting it could reach $100,000 by year-end. A 70% rally since September could potentially push BTC towards $150,000. Technical indicators on Bitcoin’s weekly price chart show positive momentum, with the moving average convergence divergence flashing green histogram bars above the neutral line.

However, traders should exercise caution when opening long positions in Bitcoin. The relative strength index at 72 signals that BTC might be overvalued, typically considered a sell signal or an indicator of an impending correction.