Moody’s Investor Service has given a provisional Ba2 rating to first ever New Hampshire’s USD 100 million Bitcoin-Backed Municipal Bond. The bonds are to be issued by New Hampshire’s Business Finance Authority and will be issued on a taxable basis. The bonds are known as the Series 2026 (Tax-Exempt) and are associated with the Waverose Finance Project.
How the Bitcoin-Backed Municipal Bond Works
Importantly, the structure of the bond itself allows Bitcoin to be used as collateral to secure bond repayment and includes mechanisms to protect against downside risk by liquidating collateral. Different from typical municipal bonds, these bonds do not carry any backing or guarantees from the state of New Hampshire. Therefore, if there is a default, the entire credit risk will be determined by the bonds’ crypto-collateralized structure.
Moody’s Ba2 rating indicates that the bonds have a speculative nature due to both the innovative nature of Bitcoin as a form of collateral and as an inherent risk associated with this type of debt. This provisional status marks that the final determination of the bond rating will depend upon the satisfactory completion of the final documentation and the legal structure of the bond.
Moody’s Ba2 Rating Importance
The issuance of a Bitcoin-collateralized municipal bond is a step forward towards the integration of blockchain technology and crypto into traditional public finance. The rating received from a major credit rating agency also establishes a connection between the traditional municipal bond market and the use of digital assets as collateral.
In addition, the issuance of bonds also demonstrates the viability of using Bitcoin as a means of securing public debts, while also providing a new method for municipalities to fund their projects using digital assets.
Final Take
The Bitcoin-collateralized municipal bond issued by New Hampshire will serve as a pathfinder for public entities to get into crypto to raise capital. The Moody’s Ba2 rating will provide institutional investors with a risk benchmark for public debt backed by digital assets and provide institutional investors with a clearer understanding of how to evaluate their creditworthiness, at the time that sets a major move forward towards mainstream crypto adoption for public finance. So far so good.
