The gravity-defying run of bitcoin has long caught the attention of retail and institutional investors. However, it appears that the one institution which the digital currency threatens its existence is beginning to see the positives of its adoption into the mainstream financial system.
The Federal Reserve Chairman, Jerome Powell, and Treasury Secretary, Steve Mnuchin, have announced plans by the American Government to pay off its deficit using bitcoin. In a statement made available to journalists, the Fed Reserve Chair stated that Bitcoin’s astronomic pace has caught the nation’s central banks’ attention and offers a huge opportunity to reduce the nation’s rising deficit.
Powell, who guided the economy through a tumultuous 2020, says the asset’s bullish run, plus growing attention from institutional investors, make bitcoin a necessary hedge against the nation’s growing debt.
Treasury Secretary, Steve Mnuchin, said he is in talks with Congress to approve the sum of $10bn, which would be used to purchase the cryptocurrency in hopes of future appreciation. It would be recalled that the United States Congress had to vote to avoid a shutdown had last month.
In the last decade, Congress has raised the debt ceiling six times, four of which occurred between 2008 and 2009. The U.S. Congress has suspended the debt ceiling until after the 2020 presidential election to prevent a repeat of the 2011 and 2013 debt crises during an election year. As a result, the U.S. debt has spiked to $27trn.
Both the Treasury Secretary and Fed Reserve Chairman believe that with bitcoin prices only going up, it presents a rare opportunity for the United States to pay off its national debt in one swell swoop.