Bitcoin Reserve Alone Won’t Solve US Debt Crisis, Think Tank Co-Founder Warns

The idea of creating a strategic Bitcoin reserve to address the United States’ mounting national debt has sparked debate, but experts caution against overstating its potential impact. Avik Roy, president of the nonprofit think tank Foundation for Research on Equal Opportunity, has dismissed the notion that Bitcoin could single-handedly eliminate the country’s $35 trillion debt.

Speaking at the North American Blockchain Summit 2024 in Dallas, Texas, on Nov. 20, Roy addressed comments made by Senator Cynthia Lummis of Wyoming, a long-time Bitcoin advocate. Lummis has proposed that Bitcoin could play a key role in solving America’s fiscal crisis. However, Roy described her vision as an “overselling” of Bitcoin’s capabilities.

“When Senator Cynthia Lummis talks about how a Bitcoin reserve could help us eliminate the federal debt, that’s an overselling of what Bitcoin could do,” Roy explained during his address.

National Debt Crisis: A Growing Concern

The United States faces a national debt that has ballooned to $35.46 trillion, driven by decades of rising deficits. Since 1981, the debt has grown at a compounded annual rate of 5.3%, according to the US Treasury Fiscal Data. Today, federal deficits exceed $2 trillion annually, underscoring the scale of the fiscal challenge.

Senator Lummis introduced the Bitcoin Act in July, urging the US government to acquire 1 million Bitcoin (BTC)—roughly 5% of the total BTC supply—and hold it for at least 20 years. She also suggested converting part of the nation’s gold reserves, worth approximately $448 billion, into Bitcoin to establish a strategic digital asset reserve.

Bitcoin Reserve: A Double-Edged Sword?

Roy acknowledged that a Bitcoin reserve could offer some benefits, such as easing tensions in the bond market.

“We’ve got at least this ability to back enough of the US dollar with Bitcoin that the bond markets can feel like the US is not going broke,” Roy explained.

However, he expressed skepticism about the long-term sustainability of such a strategy. Drawing parallels to the US government’s depletion of gold reserves in the 1970s, Roy cautioned that a Bitcoin reserve might face similar risks of erosion if fiscal policies remain unchanged.

“The Bitcoin reserve is good, but it does not solve the problem. You still have to actually do the budgetary reforms to get us out of this $2 trillion-a-year federal deficit,” Roy warned.

Trump’s Bitcoin Stockpile Proposal

The Bitcoin reserve idea has gained political momentum, with President-Elect Donald Trump promising to create a national Bitcoin stockpile. During his campaign in July, Trump highlighted his vision to integrate Bitcoin into the country’s financial strategy, signaling bipartisan interest in leveraging digital assets.

A Transformative Yet Limited Solution

While Bitcoin’s advocates, including Senator Lummis, view the cryptocurrency as a hedge against inflation and a potential stabilizing force for the US economy, Roy’s remarks serve as a reminder of its limitations. A strategic Bitcoin reserve may provide a short-term boost in market confidence, but structural reforms remain critical to addressing the root causes of America’s fiscal woes.

As the debate over Bitcoin’s role in national finance continues, the question remains: Can digital assets truly reshape the global economic landscape, or are they merely one piece of a much larger puzzle?