• The US is facing its worst debt crisis ever, as the figure has hit $35 trillion, and some suggest that Bitcoin might be the solution.
• Globally, governments owe a staggering $91 trillion, a figure that’s growing every month; the reckoning could be on its way before the decade’s end, and it will be painful.

Warning bells for the US debt crisis have been ringing for years now. However, since the Biden administration took over, this crisis has worsened significantly to hit $35 trillion this year. According to data from the US Treasury, the government is accruing $1 trillion in debt every 100 days, a new record for the largest global economy. Last year, the cost of servicing this debt crossed the $1 trillion mark for the first time ever.

National debt can be solved in two main ways: raising taxes or cutting spending. In the US, cutting spending is a much-debated issue that divides Americans and their lawmakers along partisan lines. Conservatives have pushed for budget cuts since Biden took over, but Democrats have fought fiercely against them. Taxes flip the dynamics, drawing criticism from Republicans but enjoying the support of the liberals.

This leaves Americans in an impasse. Meanwhile, the debt crisis continues to mount. For context, the debt-to-GDP ratio for the country is almost at 100%. Despite a slight sharp increase during the 2020 COVID pandemic, the last time this ratio was that high was in the 1940s during the Second World War. At this rate, debt will be 16% higher than America’s GDP by 2034, as shown below.

Can Bitcoin Solve the US Debt Crisis?

Since US lawmakers cannot reach a compromise on taxes or spending cuts, some have suggested that Bitcoin could be the solution, as we reported.

Proponents point out that Bitcoin is a deflationary asset that will hold its value (or increase) over time, unlike the US dollar, which has been losing its value for years.

One of the oft-cited factors for BTC is that it’s decoupled from traditional finance, ideally making it a hedge against inflation, However, even this is becoming less of a factor as TradFi giants like BlackRock have become the cornerstone of the sector.

One leading advocate of BTC to solve the national debt is Donald Trump, the radical Republican Party presidential candidate who has promised to make crypto central to his agenda if he wrestles power back from the Democrats in the November polls.

However, while he has been big on grand promises, Trump has been scant on details. In a recent interview with Fox, when asked about what he plans to do with crypto, he responded:

Who knows? Maybe we’ll pay off our $35 trillion dollars, hand them a little crypto check, right? We’ll hand them a little bitcoin and wipe out our $35 trillion.

Crypto, as an industry, has a $2.2 trillion market cap. But perhaps more significantly, the US government should not rely on its crypto to appreciate enough to pay its debts.

A more sensible proposal concerns stablecoins. Paul Ryan, a former House speaker, shared a plan to use stablecoins to attract foreign investment in American bonds and treasuries. Already, stablecoin issuers own more government securities than the entire country of Saudi Arabia and sit just outside the top ten largest investors.

As Ryan points out, encouraging more USD-backed stablecoins would provide the government with cheap and reliable financing for fiscal spending and extend America’s grip and influence on the global economy.

Meanwhile, BTC trades at $60,400, losing 2.5% in the past day.

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