New Hampshire Pioneers Bitcoin-Backed Bonds with Moody’s Ba2 Rating: A New Era in Public Finance

New Hampshire Set to Issue First Rated Bitcoin-Backed Bonds, Paving the Way for Crypto in Public Finance

Concord, NH — In a groundbreaking move for the intersection of cryptocurrency and traditional finance, the New Hampshire Business Finance Authority is preparing to issue what is believed to be the first rated bitcoin-backed bond. This innovative financial instrument marks a significant step toward integrating digital currencies into the realm of public finance.

The bonds, which have received a provisional Ba2 rating from Moody’s Ratings—two notches below investment grade—are backed by bitcoin valued at approximately $67,265.60. According to a press release from the authority, the bonds will be issued through the Business Finance Authority of the State of New Hampshire and will be collateralized by a loan secured by Bitcoin, a digital currency that has seen both meteoric rises and sharp declines in value.

Moody’s report highlights that the bondholders will be repaid through the liquidation of the bitcoin held in custody by BitGo, a digital asset custody provider. Should the need arise to meet interest and principal payments, the bitcoin will be sold. The structure includes robust safeguards typical of structured credit, such as a 1.6x overcollateralization and liquidation triggers that activate if the loan-to-value ratio deteriorates.

However, the rating agency also cautioned about the inherent risks associated with the transaction, particularly the volatility of bitcoin. Moody’s utilized a 72% advance rate and short liquidation windows to model potential downside scenarios, emphasizing the speculative nature of this financial product.

Importantly, the bonds are classified as limited recourse, meaning that no public funds from the State of New Hampshire will be at risk. “No public funds of the State of New Hampshire… may be used to pay amounts under the Rated Bonds,” Moody’s clarified, underscoring that while the deal utilizes a state authority, it does not carry state credit backing. This structure resembles conduit or project finance, where the issuer acts merely as a pass-through.

Despite its speculative-grade rating, the Ba2 designation signals a growing recognition among credit agencies of the need for frameworks to assess crypto-backed instruments. This development comes at a time when institutional investors are increasingly exploring ways to leverage bitcoin beyond mere trading or treasury holdings.

In a related move, the U.S. Labor Department recently proposed a rule aimed at expanding access to digital assets in retirement portfolios, following an executive order from former President Donald Trump. This further illustrates the momentum building around the integration of cryptocurrencies into mainstream financial systems.

As New Hampshire prepares to take this bold step, the financial world watches closely, eager to see how this pioneering bond issuance will influence the future of public finance and the role of cryptocurrencies within it.