Treasury Coin
The United States government should create a Treasury Coin — call it “T-coin” — based on the protocol behind Bitcoin. T-coin would be the first government-supported, anonymous, decentralized currency. First, a T-coin would generate trillions for the U.S. government via the magic of seigniorage. Second, the USG could encourage the use of T-coin by, for example, providing discounts to entities which pay their taxes with T-coin or requiring merchants to accept T-coins as payment. Third, small changes in the Bitcoin protocol could be made to modernize it, thereby facilitating more widespread demand for T-coins.
T-coin woud have all the advantages of Bitcoin, especially the protection against inflation, and also have the backing of the US government. Like Ulysses tying himself to the mast to avoid the calls of the Sirens, the USG would be tying itself to a dentralized blockchain (which it can neither override nor control) to avoid the temptations of money-printing. And, like Ulysses getting the benefit of hearing the Sirens, the USG would get the benefit of trillions of dollars of seigniorage.
Key points:
The benefits of seigniorage mean that Teasury Coin might contribute trillions of dollars to the USG. First, before releasing the project to the public, we could “premine” a third or so of the total number of coins. Second, we could make a simple change in the protocol so that the USG would receive a fraction of the coin reward each time a new block is created.
All the code for the Bitcoin blockchain is open source. There are no secrets. Nothing prevents us from copying Bitcoin down to the very last detail. Call this new blockchain the “T-chain”.
The USG could support the project by allowing people and businesses to pay their taxes with T-coin. Allowing, or even requiring, the use of a new currency for paying taxes is a tried and true method for governments throughout history to incentivise the use of a new currency. Even better, for the first year or two, the USG could offer a discount for tax payers who use T-coin. Wouldn’t you use T-coin if it allowed you to save 2% on your taxes?
Our Treasury Coin plan is completely different from the usual Central Bank Digital Currency plans because, like Bitcoin, it is, once created, outside the control of any government.
We would still use dollars. Federal workers are paid in dollars. Social security checks are denominated in dollars. The value of T-coins will float relative to dollars. The USG could bring some stability to the value of T-coins by having a regular off-chain auction, similar to the auctions which the US Treasury currently holds for new debt issuance.
T-coins are likely to be much more useful than bitcoins because the USG would have every incentive to ensure that they are. Every action which makes T-coins more valuable causes a significant increase in the dollar value of the T-coins which the USG already owns (after premining) and which it will continue to receive as new coins are mined. The USG could encourage and/or require various entities to accept T-coins for payment.
T-coins are likely to be the most secure blockchain currency in the world because the USG would have every incentive to make it secure.
Other major countries are likely already considering the launch of their own digital currencies that compete with Bitcoin. It is important for the US to be the first to launch such a project, so that the future of cryptocurrencies is made in America.
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