Turning Government Bonds into Crypto Assets
Physical Assetization of U.S. Government Bonds
White Paper
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In order to make the governance token a governance token, it is necessary to seriously discuss to building the foundation for a bridge between financial tradition and the future.
Summary
Abstract
This white paper proposes a new institutional design that functionally redefines conventional U.S. Government Bonds as “yield-bearing stablecoins” and transforms them into physical sovereign credit assets that carry no interest payments, no maturity, and no repayment obligation. By clearly separating the roles of debt, currency, and digital assets, this proposal aims to shift part of the U.S. financial system from interest-rate dependence toward quantity-based management of sovereign credit.
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- Problem Statement
1.1 Structural Characteristics of Conventional U.S. Government Bonds
• Function as the world’s largest safe asset
• Coupon payments form the global benchmark interest rate
• Fiscal deficits and interest payments compound structurally over time
• U.S. Government Bonds simultaneously serve as collateral, quasi-currency, and monetary policy instruments
1.2 Redefinition: U.S. Government Bonds as Yield-Bearing Stablecoins
Conventional U.S. Government Bonds are functionally isomorphic to stablecoins in the following respects:
• Value anchored by U.S. sovereign credit (USD)
• Par-based value assurance
• Book-entry ledger management (Fedwire / TreasuryDirect)
• Holding incentives provided through yield (coupons)
The primary differences lie in immediacy of liquidity and ledger technology.
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- Core Concept
2.1 Definition of Physical Assetization
In this proposal, “physical assetization” refers to the transformation of sovereign instruments into assets that:
• Do not rely on future interest or principal repayment claims
• Are backed directly by U.S. sovereign credit itself
• Are evaluated at market prices as digital tokens
This represents a transition from Debt to a Sovereign Asset.
2.2 Definition of USGB
USGB (U.S. Sovereign Government Bonds) are U.S. government-issued tokens that satisfy the following conditions:
• 1 USGB = par value of 0.01 USD
• No interest payments
• No maturity
• No repayment obligation
• Not usable for tax or federal payment purposes
USGB is not a currency, but a physical representation of U.S. sovereign credit.
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- USGB Specifications
3.1 Unit Design
• Minimum unit: 1 USGB (equivalent to 0.01 USD)
• Integer convertibility with USD
• Market price formation without reliance on decimals
3.2 Issuance Cap
• Issuance cap equals Congressional Budget Authority
• Maximum issuance determined by Congressional expenditure approval
• Institutionally separated from the Debt Ceiling
3.3 Relationship to Taxation
• Not usable for federal, state, or local tax payments
• Not legal tender
• No compulsory acceptance
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- Market Design
4.1 Exchange Trading
USGB is traded on authorized digital asset exchanges under full market principles.
• No par price guarantee
• The U.S. government does not guarantee market price
• Prices reflect supply and demand, inflation expectations, sovereign credit, and liquidity
4.2 Price Formation
In the absence of interest, yield is endogenized into price.
Price ≈ Par Value ÷ (Expected Inflation + Credit Risk + Liquidity Premium)
The market price of USGB effectively functions as a real-time U.S. Sovereign Credit Index.
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- Unlock Mechanism (Official Conversion)
5.1 Basic Structure
• USGB remains locked under normal conditions
• Unlocking conditions are defined by the U.S. Treasury and the Federal Reserve
• Upon unlocking:
• 1 USGB may be officially converted to 0.01 USD
5.2 Characteristics
• Not continuously redeemable
• Executed only as a policy event
• Functions as a final liquidity backstop
This mechanism is not fixed convertibility, but a policy option.
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- Roles of the U.S. Treasury and the Federal Reserve
6.1 U.S. Treasury
• Issuer of USGB
• Manages issuance volume in alignment with the federal budget
• Determines unlock conditions
6.2 Federal Reserve
• Operates settlement and ledger infrastructure
• Handles USD supply mechanics
• Does not engage in continuous price intervention of USGB
Under this framework, interest-rate policy plays a limited role, while quantity management becomes central.
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- Relationship with Existing U.S. Government Bonds
Item Conventional U.S. Government Bonds USGB
Interest Yes No
Maturity Yes No
Repayment Obligation Yes No
Tax Use No No
Nature Debt Sovereign Credit Asset
Existing U.S. Treasury Bills, Notes, and Bonds are honored to maturity. USGB is introduced as a parallel, new institutional instrument.
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- Significance for the International Financial System
• Gradual reduction of overreliance on the U.S. Treasury market
• Structural separation of interest-rate policy and sovereign credit assets
• Non-competitive coexistence with the dollar-based system
• Real-time visibility of U.S. sovereign credit
USGB is not a CBDC (digital dollar) and is not designed as a payment currency.
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- Conclusion
USGB is neither a U.S. Government Bond, nor a currency, nor a crypto asset in the conventional sense. It represents a fourth category of U.S. financial asset.
It is not debt, not a repayment promise, but a physical asset that directly exposes U.S. sovereign credit to the market.
This proposal is not about digitizing finance, but about the redesign of sovereign credit itself.
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- USGB and DeFi Debit Cards (Interface Layer)
10.1 Separation of Asset and Payment
USGB is explicitly not designed as a payment instrument. Treating sovereign credit as a direct means of payment would collapse the distinction between assets and money and would invite currency regulation, CBDC classification, and mandatory acceptance frameworks.
DeFi debit cards function purely as an interface layer, converting on-chain value into existing payment rails (e.g., Visa / Mastercard) without altering the nature of the underlying asset.
Sovereign credit remains an asset, not money.
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10.2 Structural Flow
U.S. Sovereign Credit
↓
USGB (On-chain Asset)
↓
DeFi Protocols (Collateral / Liquidity)
↓
Stablecoins (USDC, etc.)
↓
DeFi Debit Card
↓
Merchants & Payment Networks
USGB itself is never spent. Only liquid representations derived from it are used for payments.
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10.3 Why Direct USGB Payments Are Avoided
Direct payment usage of USGB would:
• Blur the boundary between sovereign assets and currency
• Trigger monetary regulation and legal tender assumptions
• Undermine the asset-based design of sovereign credit
By contrast, the debit card interface:
• Preserves USGB as a pure asset
• Localizes regulatory compliance to card issuers
• Leverages existing global payment infrastructure
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10.4 USGB as DeFi Collateral
USGB can be utilized within DeFi protocols as:
• Collateral for stablecoin borrowing
• Liquidity pool asset
• Base reference asset for sovereign credit derivatives
This enables use without disposal: holders can access liquidity while retaining exposure to sovereign credit.
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10.5 Innovation Point
Traditional model:
• Government bonds → Sale → Cash → Consumption
USGB model:
• Sovereign credit → Hold → Liquidity extraction → Consumption
This represents the collateralization of sovereign credit, not its monetization.
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- Regulatory Positioning (High-Level)
• USGB is not legal tender
• USGB is not a CBDC
• USGB is not designed as a payment token
• USGB functions as a non-yielding sovereign credit asset
Regulatory obligations related to AML/KYC and consumer protection are confined to exchange operators, DeFi gateways, and debit card issuers, not to the sovereign asset itself.
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Appendix
This white paper presents a conceptual institutional model and requires ongoing examination of consistency with the U.S. Constitution, fiscal law, securities regulation, financial oversight frameworks, and international coordination.