The Promise of Digital Dollar Bonds

If history is any guide, the US could boost the acceptance of a US CBDC and spur the mass adoption of DeFi by selling Digital Dollar bonds in tandem with the issuance of a US CBDC. Here’s my reasoning.

Historically, every time the US government has issued popularly-priced bonds aimed at mass adoption, it has led to a growth, if not explosion, in private sector investing. This has happened with the Civil War, World War I, and World War II. It was during these times that the US wanted popular support and funding of wars and a dampening of inflation at the same time. Civil War popular loans led to an expansion in investing in railroad stock, WW I to popular investing in the Stock Market, and WW II to the rise of retail investing, like Charles Schwab, etc. So, my argument would be that if the US Treasury rolled out a popular Digital Dollar bond, it would lead to spillover effects in DeFi. Once people are used to investing their crypto in crypto securities via US bonds, they would be more comfortable with DeFi and start moving to DeFi for higher returns.

But, if we take a step back and look at the Civil War, there are also reasons for issuing such a bond in tandem with the rollout of a US CBDC. In 1862, the US launched its first fiat currency, the Greenback or United States Note. To boost popular adoption of this radical new currency, stabilize its value, and fund the Civil War, the Treasury rolled out a number of bonds and notes that were priced for the small investor and could be purchased (sometimes only) with the new currency. This tactic worked exceedingly well. The Greenback became very popular as did small scale investing. A synergy resulted.

Lastly, issuing a US CBDC and Digital Dollar bonds could boost thrift or micro-investing. Such an impetus, the demand for government supported micro-investing, arose during WW I and WW II, but got killed off by the banking and finance industries. A US CBDC could finally make micro-investing available to those who want it. This could be done via fractional Digital Dollar bonds or through private, DeFi offerings.

So, combining a US CBDC with Treasury Digital Dollar securities could mainstream the new CBDC, DeFi, and micro-investing. It’s worth a thought.