Vander Aljara, co-founder of Black Swan Capitalist, recently caused the X obstacles by proposing a bold idea of government bonds backed by XRP.
Aljarrah suggests that instead of issuing traditional financial obligations, the US government can issue debt certificates derived from XRP. Investors purchase XRP from the Treasury Department, earn a fixed yield, such as 2% per year, paid in US dollars or XRP, and redeem the assets at maturity, just like traditional bonds.
In theory, such systems can modernize the sovereign debt market by leveraging blockchain technology, increasing transparency and efficiency. But it also faces major challenges before it becomes a feasible reality.
Issues for XRP-supported government bonds
The concept of tokenized government debt is not entirely out of nowhere, especially as a global financial experiment using digital assets. However, some major hurdles get in the way. The main drawback is the volatility of crypto assets.
Unlike US Dollar and other Fiat-backed securities, cryptocurrencies like XRP remain volatile. Its value fluctuations need to be significantly reduced to function as a stable debt instrument, and perhaps require a mechanism similar to a stable mechanism.
Another factor is the regulatory barrier. Until now, the US SEC has been well known for being famous for cryptocurrencies. Yet despite the evolved attitude towards crypto under new leadership, issuing XRP-backed bonds may require new financial regulations and a clear classification as an acceptable reserve asset for XRP.
In particular, efforts are underway to clarify crypto regulations. Still, the current US administration and some states simply recognize Bitcoin as a qualifying reserve asset.
Some states like New Hampshire, The law has already been passed Allocate financial investments in Crypto assets at a cap of over $500 billion. In fact, Bitcoin is the only asset that meets this requirement.
Another challenge to XRP-backed government bonds is the financial system itself. Aljara himself acknowledges that something must “fundamentally collapse” in traditional bond markets in order for the government to seriously consider such radical alternatives. A global debt crisis or collapse of trust in traditional Treasury debt could encourage investigations of alternatives.
Despite these challenges, the broader concept of blockchain-based sovereign debt is already attracting attention. Countries like El Salvador are exploring tokenized bonds, and tokenization of real-world assets (RWAS) is becoming a major trend in cryptocurrency.
While XRP-backed US government bonds remain speculative, Bitcoin is already seeing serious bond proposals at the system level.
Bitcoin government bonds
At the recent Bitcoin for America event, Newmarket Capital CEO Andrew Horns suggestion The US government issues $2 trillion in bonds and allocates 10% to Bitcoin.
According to Hohns, these bonds are issued at a 1% interest rate, significantly lower than the current 4.5% yield from the U.S. Treasury, saving the government $70 billion a year, or $700 billion over a decade. The plan aims to introduce Bitcoin exposure while reducing the overall cost of debt.
Interestingly, Vanek executive Matthew Sigel made a similar Bitcoin proposal to help government refinances support $14 trillion in debt.
