As of December 2024, the United States owes China approximately $759 billion in U.S. treasury securities, making China one of the largest foreign holders of U.S. debt. If the U.S. government may starts making partial debt payments to China using a centralized cryptocurrency, several key factors would shape its impact:

Potential Outcomes?

1. The global adoption of centralized crypto move could accelerate the adoption of state-backed digital currencies, such as CBDCs (Central Bank Digital Currencies), influencing global trade.

2. The U.S. digital dollar have to compete with China’s digital yuan (e-CNY), potentially reshaping international finance.

3. Crypto markets will experience short-term instability, as investors may react to the shift in debt repayment mechanisms.

4. Governments need to establish strict regulations to prevent manipulation and ensure transparency in transactions.

Who Would Control the Centralized Crypto?

- If the U.S. issues a centralized crypto for debt payments, it would likely be controlled by the Federal Reserve and U.S. Treasury.

- If China demands payments in digital yuan, then China’s central bank (PBOC) would have control over the transactions.

- A joint governance model could emerge, where both nations agree on oversight mechanisms, but this will require complex diplomatic negotiations.