The allegation — that the U.S. would “dump” or “shove” its federal debt into crypto (or into dollar-backed stablecoins) to devalue it — is a politicized claim currently being repeated in several outlets after comments by Anton Kobyakov (a senior adviser to Vladimir Putin). It’s plausible as rhetoric and worry-making, but implementing a true “debt dump into crypto” at scale would be legally, economically and practically complex and would produce major, messy consequences worldwide. Below we outline
(1) what the allegation is and how realistic it is, and
(2) the plausible global impacts on governments and ordinary people under several scenarios
— plus practical steps nations and citizens could take to reduce harm.
1) What was actually claimed — and how realistic is it?
What was said: Anton Kobyakov asserted publicly that the U.S. might convert or reclassify parts of its huge debt burden into crypto or stablecoins (and use gold/crypto mechanisms) to devalue or “start from scratch” on its obligations. This claim has been widely reported.
How realistic that is in practice:
- Governments can’t simply “erase” legally issued Treasuries by dumping them into an illiquid private market. Treasuries are legal obligations recorded on balance sheets and enforced by markets and law. Any formal reclassification would require major legislative or accounting changes and face immediate legal, political and market pushback.
- A more realistic near-term move would be using tokenization or dollar-backed stablecoins as tools to support dollar liquidity and demand (for example, regulated stablecoin issuers holding Treasuries as reserves). Policymakers and analysts have discussed stablecoins as a way of increasing demand for Treasury bills (not erasing debt). The WSJ and others have argued that regulated dollar stablecoins could increase demand for U.S. debt rather than erase it. The Wall Street Journal
Bottom line: the claim is a high-stakes geopolitical charge; parts of it are technically imaginable at the margins (tokenization, using seized crypto, issuing digital-dollar vehicles), but the straightforward story that the U.S. can legally and quietly “dump $35T into crypto and wipe it out” is extremely unlikely without systemic chaos and global legal/political reaction. SpringerLink
2) If it did happen — three plausible scenarios and their likely impacts
Below I treat three progressively severe scenarios. Each describes likely economic and societal effects worldwide.
Scenario A — Limited, structured tokenization/stablecoin use (most plausible)
Description: U.S. authorities and private issuers expand regulated, dollar-backed stablecoins and tokenized Treasuries to improve payments and finance; some Treasury supply shifts into tokenized instruments held by market participants. This does not write off debt — it changes form and markets.
Likely impacts:
- Financial plumbing improves: faster cross-border payments, lower settlement costs, new liquidity pools. (Short-term win for commerce and fintech.)
- Global reserve dynamics: tokenized dollar instruments could keep global demand for dollars and Treasuries stronger, delaying any forced diversification away from the dollar.
- Distributional effects: benefits accrue to fintech firms, crypto investors, and tech-savvy financial centers; ordinary citizens gain from faster payments but not from debt reduction.
- Risk: concentration of dollar-denominated tokenized assets could create new points of systemic risk (runs on stablecoins, smart-contract failures). Policymakers would need strong regulation. SpringerLink
Scenario B — Managed conversion + controlled devaluation (politically fraught)
Description: U.S. tries to convert part of its liabilities to a new digital instrument with different legal terms (e.g., long maturities or CPI-linked tokens) and uses regulatory/market levers to reduce the real burden — effectively a partial re-profiling of debt.
Likely impacts:
- Bond market shock: creditors who hold Treasuries would demand compensation; yields would spike unless the move is coordinated and compensated. That raises borrowing costs globally.
- Currency turbulence: loss of confidence in U.S. debt management could weaken the dollar, raising import prices worldwide and pushing inflation higher in import-dependent countries.
- Contagion: global banks and pension funds with large Treasury holdings would face mark-to-market losses; emerging markets could see capital flight and currency stress. Ordinary savers could see retirement portfolio losses and higher loan rates.
- Geopolitics: allies would object strongly; global governance institutions might be strained. Some countries could accelerate diversification away from dollar assets (buy more gold, local currency swaps).
Scenario C — Chaotic “dump” or outright default disguised via crypto (catastrophic, unlikely)
Description: The U.S. attempts to push large amounts of obligations into unregulated crypto vehicles or uses a devaluation tactic without creditor consent.
Likely impacts:
- Global financial crisis: Treasuries are central collateral. A loss of trust in their value would freeze repo markets, money markets and cross-border dollar funding — potentially triggering a liquidity crunch and recession worldwide.
- Crypto market explosion then collapse: initially crypto prices (especially dollar-pegged assets and Bitcoin) might spike on speculative flows, then crash as markets realize the legal/credit mismatch — causing heavy losses for retail holders and leveraged funds.
- Severe real-world pain: job losses, higher borrowing costs, pension hits, and sudden spikes in prices for energy and goods in import-reliant countries. Low-income households globally — with limited hedges and more of their income spent on essentials — would suffer disproportionately.
- Geopolitical fragmentation: a major reorientation of international payment systems — faster pushes to non-dollar settlements, expanded use of gold or alternative payment rails, and possible trade decoupling among major powers.
3) How different actors would be affected (practical view)
Advanced economies & financial institutions
- Short-term pain if confidence falls: banks/pension funds with Treasury exposure would take losses; central banks may intervene.
- Longer term: winner/loser depends on whether credible alternatives (e.g., tokenized dollar instruments under robust regulation) restore trust.
Emerging markets
- High vulnerability: they rely on dollar funding and hold Treasuries as reserves. A sharp USD depreciation or sudden Treasuries volatility could trigger currency crises and capital flight.
Ordinary citizens worldwide
- If crisis occurs: higher inflation, recession risk, job losses, reduced real incomes, and possible erosion of retirement savings.
- If managed/tokenized transitions occur: few direct benefits; tech-savvy consumers may enjoy faster payments, but debt relief for citizens is unlikely.
Crypto holders
- Short term: speculative gains possible, but extreme volatility; later, heavy losses if the scheme is exposed as economic theater. Crypto markets could become more regulated afterwards — hurting unregulated players.
4) Likely policy & market responses
- Central bank and IMF intervention to shore up liquidity and coordinate swap lines (as happened in 2008/2020). Thomson Reuters
- Regulatory crackdown on stablecoins if they’re used for sovereign maneuvering — countries will move to reserve and supervise these instruments tightly. The Wall Street Journal
- Diversification of reserves: some states would accelerate buying gold and non-dollar assets (a reaction already reported in some media narratives).
- Legal challenges: creditors could sue; global legal and contractual frameworks would be tested.
5) Practical advice — what governments and citizens should do now
For national governments and central banks
- Stress-test foreign-reserve portfolios and prepare contingency liquidity plans.
- Coordinate internationally (IMF, BIS) to maintain market functioning and avoid protectionist spirals.
- Regulate tokenized/digital instruments to prevent their misuse as tools for unilateral debt re-profiling.
For ordinary citizens and savers
- Maintain diversified portfolios (cash, short-duration bonds, equities, real assets). Avoid panic moves into speculative crypto as a hedge against macro policy panic.
- If you hold crypto: be mindful of leverage and custody risks; keep a portion in regulated venues and understand peg risks for stablecoins.
For investors and firms
- Reassess counterparty and sovereign risk exposures; increase liquidity buffers.
- Prepare operational plans for payments disruptions and hedges for FX and interest-rate risk.
6) Bottom line — probability and severity
- Probability of the U.S quietly and successfully “dumping $35T into crypto” and erasing it: very low. The legal, market and political barriers are huge.
- Probability of greater integration of tokenized instruments and regulated stablecoins into finance: moderate to high. That is a real trend and will reshape payments and liquidity, not magically erase debt.
- Severity if a chaotic debt re-profiling were attempted: very high — global financial instability and serious hardship for ordinary people.
Also read – Trump’s Tariffs on India — A Case Study in Double Standards
How the United States is (and isn’t) trying to hedge its debt with cryptocurrency?
The United States is carrying a very large national debt — measured in tens of trillions of dollars — and policymakers, pundits and markets have been debating unconventional ideas for years about how to manage, hedge or diversify sovereign risk. One of the most eye-catching proposals of 2024–2025 has been the idea of using crypto — primarily Bitcoin and tokenized/regulated stablecoins — in some official capacity: as an asset on government balance sheets, as a strategic reserve, or as part of a tokenized financial infrastructure. This article explains what the U.S. has actually done so far, what it’s proposing, the economics and risks, and what to watch next.
What the government has done so far (concrete steps and announcements)
- Executive order creating a “Strategic Bitcoin Reserve” (March 6, 2025).
The White House issued an executive order in March 2025 establishing a Strategic Bitcoin Reserve (SBR) and a U.S. Digital Asset Stockpile — a formal policy recognition that seized or otherwise-held crypto could be managed as a government strategic asset rather than immediately liquidated. The order framed digital assets as resources the U.S. should “harness” for national interest. This is an explicit policy move, not merely commentary. - The U.S. already holds seized crypto that can be repurposed.
Part of the SBR discussion was practical: law enforcement seizures over the years have left the federal government holding a sizable quantity of Bitcoin and other tokens. The executive order and subsequent fact sheets contemplated managing these holdings strategically rather than simply auctioning them off immediately. - Policy evolution and mixed follow-up signals through 2025.
After the March order there were follow-on debates and clarifications from Treasury and Commerce officials about how to grow the reserve in a “budget neutral” way; at the same time some officials and outlets later clarified that the Treasury would not be actively buying additional Bitcoin beyond what it already holds (statements in August 2025 illustrate this caution). In practice, then, the U.S. has created a policy framework but has not (as of these public statements) significantly rebalanced Treasury-held assets into large, ongoing purchases of crypto.
Why crypto is being discussed as a hedge against debt / dollar risk
Three arguments drive interest in crypto as a potential hedging tool:
- Limited supply narrative (Bitcoin) — Bitcoin’s capped supply is sometimes pitched as an “anti-inflationary” store of value: if sovereign debt growth leads to long-run fiat debasement, a scarce digital asset could provide diversification. Proponents argue a modest allocation to bitcoin could help preserve purchasing power.
- Diversifying reserve composition (stablecoins & tokenization) — Stablecoins and tokenized securities could make government cash management and payments more efficient, and a regulated, asset-backed stablecoin industry might offer new tools for Treasury and money-market operations. Major private stablecoin issuers are also evolving to meet U.S. regulatory requirements, which attracts official interest.
- Geopolitical / sanctions risk — Some central banks and policymakers are exploring digital assets to reduce vulnerabilities (for example, to sanctions or to overdependence on any single currency). Academic work and central bank dialogues have considered diversification into non-traditional reserve assets as an insurance policy. ScienceDirect
The economics: can crypto actually hedge national debt?
Short answer: partially — but with major caveats.
Pros
- Bitcoin is uncorrelated at times with traditional assets. If its price appreciates while the dollar weakens, it could offset some erosion of real value caused by debt-financed monetary expansion. Internationally, tokenized assets could broaden funding sources. IMF
- Stablecoins (when properly regulated and fully backed) can improve payment efficiency, reduce transaction costs, and open new liquidity channels for state actors — which helps cash management, not direct debt reduction.
Cons / risks
- Volatility: Bitcoin’s price swings are huge relative to sovereign balance sheets. A small sovereign allocation can produce outsized balance-sheet volatility — politically and economically risky. This is the central objection from many economists.
- Market impact & timing: Any large, regular Treasury purchases of crypto would meaningfully move crypto markets and be costly. The SBR idea relies so far on seized assets rather than fresh purchases to avoid this.
- Regulatory & legal complexity: Using crypto as a reserve requires legal frameworks for custody, valuation, auditing and accounting. The U.S. push toward regulated stablecoins (and rules requiring high-quality reserve backing) aims to address parts of this but doesn’t remove all frictions.
- Political cost: Putting public assets into a volatile, politicized instrument invites scrutiny and potential backlash, especially if prices fall. Many observers argue the Treasury’s fiduciary obligations make aggressive crypto allocations unlikely. Forbes
Stablecoins and tokenization: the more practical near-term play
Rather than positioning Bitcoin as a direct “debt hedge,” U.S. policy and private sector activity point toward stablecoins and tokenization as the more actionable path:
- Regulated stablecoins pegged to USD and backed by Treasuries or cash-equivalents are being rolled out (new issuances and legislative frameworks in 2024–2025). If stablecoins are fully regulated and custodians hold Treasuries as reserves, stablecoins end up redirecting short-term dollar demand into tokenized, bank-like instruments — useful for payments and settlement. That doesn’t reduce nominal national debt, but it can improve liquidity and the velocity of funds, and potentially reduce frictional financing costs.
- Tokenized treasuries and CBDC/tokenized reserves: BIS and other international bodies have explored tokenized central-bank reserves for wholesale settlement. Tokenizing Treasuries and money-market instruments could increase efficiency and allow programmable finance applications — again, not a direct debt cure but a modernization that could lower transaction costs across the financial system. Bank for International Settlements
Political and institutional realities: incremental, cautious, contested
- The federal government has moved to preserve and manage existing crypto holdings (the SBR), not to run open-ended BTC accumulation programs. Public statements from Treasury and Commerce signal caution: figuring out custody, accounting and market impacts is non-trivial. The White House
- States and municipalities — and private institutions — are experimenting more aggressively (some cities/states exploring bitcoin reserves for pension hedges or municipal treasury experiments). These sub-national moves increase political pressure and create data points the federal government will watch. blockchainandthelaw.com
- Private stablecoin issuers and crypto firms are preparing regulated product launches tailored to U.S. rules (e.g., new stablecoins backed with Treasuries or high-quality assets) — and that private infrastructure may be where most practical gains reside. Financial Times
What to watch next (key indicators)
- Official guidance on how the Strategic Bitcoin Reserve will be valued, audited and reported — that will determine how the asset appears on federal balance sheets and the level of transparency.
- Treasury/open-market actions — any movement from “manage existing holdings” to “purchase additional crypto” would be a major policy shift; public statements that the Treasury will not buy more are therefore significant.
- Stablecoin regulatory implementation and market uptake in the U.S. — the composition of stablecoin reserves (how much Treasuries vs. other assets) matters for short-term Treasury demand/supply dynamics.
- IMF/BIS and central bank research — their reports on crypto’s systemic risk and central-bank tokenization give signals about international coordination, which affects dollar hegemony debates.
Bottom line — is crypto a practical hedge for U.S. national debt?
At present, crypto is being integrated cautiously and experimentally into U.S. policy thinking — mostly via a strategic reserve built from assets already in government possession, and via interest in regulated stablecoins and tokenized infrastructure. Those moves are not the same as using crypto to “pay down” or directly eliminate national debt.
Crypto can offer diversification benefits and technological efficiencies; stablecoins and tokenization could be especially useful for payments and liquidity management. But major obstacles — volatility, governance, market impact, and political risk — make large-scale, active use of crypto as a primary hedge for national debt unlikely in the short term. Instead, expect incremental, carefully regulated steps: managing seized crypto strategically, building regulated stablecoin rails, and experimenting with tokenized reserves and settlement systems.
