New Hampshire’s Innovative Bitcoin-Backed Bonds

The New Hampshire Department of Corporate Finance is preparing to issue a Bitcoin-backed bond, which is thought to be the first of its kind. This move signals a potential shift towards integrating cryptocurrencies into more traditional public finance frameworks.

These bonds have been provisionally rated Ba2 by Moody’s Ratings, which is two levels below investment grade. They are issued through New Hampshire’s Department of Corporate Finance and are backed by Bitcoin. According to a press release, this Bitcoin is being held as collateral.

Moody’s pointed out that “the rated notes will be secured by a loan backed by the digital currency Bitcoin.” This framework operates on Bitcoin rather than the cash flow that might come from a company. Essentially, bondholders will receive repayments through the liquidation of the Bitcoin held by BitGo, with BTC being sold as necessary to cover interest and principal payments. The agreement includes standard protections typically seen in structured credit, such as overcollateralization at a rate of 1.6 times and triggers that require liquidation if the loan-to-value ratio worsens.

The agency noted that the rating takes into account various risks linked to the collateral, the structure, and the transaction’s operations, particularly highlighting Bitcoin’s price volatility. Moody’s employed a 72% prepayment rate and a short liquidation period to create models for potential downside scenarios.

Crucially, these bonds have a limited maturity, which means that public funds are not put at risk. “No New Hampshire public funds may be used to pay any amounts under the rated notes,” according to Moody’s.

This distinction is quite significant. While the arrangement utilizes state authority, it isn’t secured by state credit. It resembles more of a conduit or project financing, where the issuer essentially acts as a pass-through entity.

Nevertheless, this structure introduces Bitcoin into a segment of the financial system that rarely sees such innovations—rated bonds channeled through public avenues.

Although a Ba2 rating places the bond in speculative-grade territory, it also indicates that credit institutions are beginning to establish frameworks for assessing crypto-backed products.

This development comes as financial institutions are actively exploring ways to utilize Bitcoin beyond mere transactions or Treasury holdings. Recently, the Department of Labor proposed a rule that aligns with President Donald Trump’s executive order, aimed at broadening access to digital assets within retirement portfolios, a further advancement in this realm.