New York risk or reward?

Mayor Eric Adams unleashed excitement and skepticism across the Bitcoin 2025 crypto community when he announced plans to launch Bitcoin-enhanced debt in New York City. These instruments, known as Bitbonds, come with a small portion of BTC.

Director Brad Lander later publicly opposed the initiative, deeming the plan irresponsible. However, experts consulted by Beincrypto suggest that Bitbonds retains the possibility that they cannot be denied.

Among the Mayor’s race, Adams’ Cryptographic Gambit

New York Mayor Eric Adams’ recent attendance at the Bitcoin 2025 conference in Las Vegas changed his mind as he completely rekindled support for the crypto industry.

He was somewhat unexpected considering that City Hall confirmed his attendance a day before the event.

Adams’ speech included a pledge to defend the city’s creation of “Bitbond,” a type of Bitcoin-supported bond.

“We believe we need to have a bit of bond. We’re going to push and fight to get a bit of bond in New York so we can make the same bond investments as them in New York,” Adams said at his address.

The timing of the announcement coincides with the intensifying mayoral race, raising questions about Mayor Adams’ intentions.

Given his record approval rates, skeptics have questioned whether he has used the crypto industry to gain political advantage and secured re-election as independence.

When Beincrypto contacted the Adams press office to comment on the Bitbond announcement, City Hall spokesman Allison Maser highlighted the mayor’s commitment to the industry.

“Mayor Adams was the first US mayor to convert his first three paychecks into crypto, showing that he will always embrace tomorrow’s technology under this mayor. Shortly after the first digital assets and Crypto Summit, Adams attended the 2025 Bitcoin Conference, Maser said.

City director and Democratic mayoral candidate Bradlander quickly criticised Adams’ Bitbond announcement.

Financial warning from the Secretary

In a press release released shortly after Bitcoin 2025, Lander called Adams’ Bitbond Plan “legally questionable and financially irresponsible.”

“New York City will not issue Bitcoin-backed bonds on my watch. Mayor Eric Adams may be willing to stake our future on the crypto in exchange for a trip to Vegas, but my job is to ensure the financial stability of our city,” the release reads.

In addition to his criticism, Lander’s senior spokesperson, Oluwatona Campbell, highlighted the lack of prior consultation when Beincrypto asked for comment from their office.

“Even though they are jointly responsible for issuing city debts, the Secretary’s office has not been approached by anyone on the concept of issuing debts that are linked to all sorts of cryptocurrencies, both inside and outside the mayor’s office,” he said.

Putting politics aside, as crypto becomes more popular around the world, it is worth discussing what Bitbonds can offer as debt certificates.

Bitbonds: A new type of debt instrument?

Three years ago, Brian Estes, chief investment officer of off-chain capital investment funds, proposed US Treasury Bitbond.

“We decided to put the idea into the public domain, not patents or trademarks, because we think it’s the best interest of the US and those who issue bonds,” Estes told Beincrypto.

Bitbond works like a traditional Treasury bond, but is designed to provide additional benefits to both financial institutions that first purchase, and will later be extended to the final bond buyer.

These bitbonds are sold through auctions to select groups of financial companies. What makes them distinctive is the fact that they contain small amounts of Bitcoin. Once the bond reaches maturity, this Bitcoin is paid directly to the bondholder, along with the full original investment.

However, according to Comptroller Lander’s comments on Bitbonds, city bonds appear to be very different from federal bonds.

“While the federal government issues bonds to fund traditional spending, New York City mainly issues bonds to fund capital assets, and only in very narrow circumstances can the city fund other purposes,” his press release read.

Lander’s spokesman also mentioned other reservations regarding Bitcoin instability.

“Our office is not considering issuing debts that have something to do with cryptocurrency given that neither current federal nor state laws support cities that handle cryptocurrencies. Furthermore, working with cryptocurrencies does not benefit citizens,” added Campbell.

But Estes pushed back some of this skepticism.

Bitcoin “kicker” and low interest rates

According to Estes’ Bitbond proposal, if the Treasury auctions a $100 billion 10-year Bitbond, 1% of the $100 billion will be used to buy Bitcoin. Estes calls this allocation a bitcoin “kicker.”

Assuming that the price of Bitcoin is $100,000 at the time of auction, this billion dollar would buy 10,000 BTC. Once the bond reaches maturity, this bitcoin and the entire original investment will be transferred directly to the bondholder.

Estes believes this logic applies to local bonds as well. He even proposed that Bitcoin-enhanced bonds in New York could reduce interest costs for residents.

“In my opinion, Bitbonds can significantly reduce the interest rates local governments have to pay. If you are the issuer of New York City bonds and need to pay bonds worth $1 billion, it’s better to pay a lower interest rate than a higher rate,” he said.

The only difference between the two is the possibility of taxation.

“Municipal bonds are not taxable at the federal level, so we do not pay federal income tax on local government bonds. It is the same whether they contain Bitcoin, Estes explained.

Regarding Lander’s concerns, Estes said his investment fund proposals have many of them in mind.

Is Bitcoin volatility dropped out?

Among Lander’s many concerns was the inherent volatility of Bitcoin and the impact that portion of the allocated bonds had on buyers.

“Cryptocurrency is not stable enough to fund our city’s infrastructure, affordable housing, or schools. If New York City proposes that it should open up capital plans to crypto, it could put our city at new risk and erode the trust of bond buyers in our city,” he said in a press release.

Lander had assumed that Bitbond would allocate 10% to buy Bitcoin for a strategic Bitcoin reserve, but Estes pushed this back.

He says there is only 1% of Bitcoin that needs to back up the bond first. On the other hand, bondholders receive any valuations that can be obtained through maturity.

“Sizing the amount of Bitcoin into bonds at a small percentage of 1% is a minimal risk. No matter how unstable Bitcoin is, if it is only 1% of the value of that bond, it will not show up in volatility analysis,” Estes told Beincrypto.

According to Estes’ Bitbond’s proposal, buyers will receive the full principal of the bond, even if the price of Bitcoin drops dramatically.

Estes also said it is not the first time the US has issued bonds that are not supported solely by the US dollar.

Reintroducing the hard money standard

The idea of ​​Bitcoin Enhancement Bonds is not a radical invention. According to Estes, it simply reintroduces a similar type of contract that existed during the Bretton Woods era in the US, when the US dollar was fixed to gold.

“There are contracts in bonds. Before 1971, the bonds were repaid in either US dollars or gold. You had a choice. In 1971, the US fell out of the gold standard,” Estes explained.

Bitbonds adopts a similar structure.

“What Bitbond does is have a contract like we had before 1971. And the contract would say that 1% of the money invested will be paid in Bitcoin.

What is still missing is a good framework to ensure that Bitcoin is transferred smoothly to bondholders when bonds mature.

Is NYC ready for a Bitcoin transaction?

Among Lander’s many concerns was the lack of infrastructure for Bitcoin trading in New York City.

“In New York City, there is no mechanism for paying capital assets other than US dollars, nor does it convert Bitcoin into US dollars,” he said.

Estes acknowledged that this kind of infrastructure needs to be built. Nevertheless, he argued that creating it using existing mechanisms is rather simple.

“Companies like Lightspark are built on a Lightning network that makes it very easy to build infrastructure,” says Estes.

The maturity period of a long bond provides ample time to develop a mechanism for transferring physical Bitcoin to holders.

“Essentially, what you do is issue bonds, get 1% of the revenue and buy Bitcoin. A government that issues Bitcoin is custody of Bitcoin until the bond matures. Once that bond matures, the face value of the bond is returned to the bond holder.

Ultimately, how Bitcoin infrastructure is handled is tied to the larger issues of Bitbonds’ overall financial and legal preparation.

Water Testing: The Need for a Pilot Program

Implementing Bitbonds requires a thorough analysis of financial health and impact. The correct application requires federal and state laws, tax regulations, volatility impacts, and compatibility analysis with the right infrastructure.

Regulators and lawmakers should carefully consider the proposal to avoid eroding investor trust. This is especially important in municipalities like New York City, which have traditionally received strong bond ratings from major credit rating agencies.

That said, despite the fact that US bonds currently face historically high interest rates on the market, the nation is tackling Balloon’s budget deficit, but Estes firmly believes Bitbond is worth exploring. He suggests that they start either in a test period or in a pilot project.

“The federal government or local government should test the market and see where the demand is. There’s nothing wrong move at all… you should try it first. You should see if it works. 0, Estes concluded.

The only way to find it is to test it.