Coinbase CEO Brian Armstrong has made a bold proposal to rein in inflation and unchecked government spending.
According to him, crypto can be used as ‘hard-backed currency.’ For growth, he floated AI and robotics as the best bet to spur the next growth. He noted,
The US Constitution was the most important political innovation ever, but it’s missing two important things: A cap on the growth of government spending and a requirement for hard-backed currency.
He added,
Without them, every democracy drifts toward more debt and eventual loss of reserve currency status.
As of writing, the total U.S fiscal debt has hit $39.4 trillion. Armstrong cautioned that the fiscal debt increases by $1 trillion after every 100 days, largely driven by the current broken ‘political incentive structure.’
Can Bitcoin, stablecoins solve U.S. debt?
Others were quick to correct him, saying that the Constitution only allows gold and silver coins to be used to pay debts. Well, that’s why he is advocating for an amendment to include other “money” options.
For his part, BitGo CEO Mike Belshe supported his proposal and added,
The Bill of Rights protects you from the government taking your speech, your property, your liberty. It’s time to update it to protect you from the government debasing your money.
Well, this is not the first time crypto has been floated as a solution to U.S fiscal debt.
In particular, Bitcoin’s hard-coded supply limit of 21 million coins has been viewed as a potential replacement for gold or a better digital alternative to the precious metal.
In fact, the two assets have shown close correlation, sparking a ‘debasement trade’ during the West Asia crisis. They acted as macro hedges, and their demand pushed their values higher.
So far, gold and Bitcoin prices have fallen together amid slow but progress toward a solution to the West Asia crisis.
Bitcoin vs. America’s debt problem
But U.S inflation has devalued the dollar by nearly 97% since 1913. Since 2000, the US dollar’s purchasing power has dropped further to a record low. Over the same period, BTC value has surged from below $1 to over $50K.
In fact, the Trump Administration is betting on a Bitcoin strategic reserve and stablecoins to manage its debt. Unfortunately, VanEck projected that a BTC reserve can only help pay 18%-36% of the US debt by 2049.
The above projection holds only if the government holds 1 million BTC and the price surges from $250K to $43M per coin before 2050.
Overall, the crypto proposal may not fully solve the U.S debt problem. However, capping government spending could be a practical step toward addressing the fiscal debt issue.
Final Summary
- Coinbase CEO proposed crypto as ‘hard-backed money’ to address the U.S $39T fiscal debt problem
- But crypto could only pay a fraction of the U.S debt, assuming BTC price hits $43M per coin by 2049.
