In a historic move that could reshape the public finance landscape, New Hampshire has become the first U.S. state to approve a municipal bond explicitly backed by Bitcoin. The state’s Business Finance Authority (BFA) has authorized a pioneering $100 million conduit bond, prioritizing over-collateralized Bitcoin (BTC) as its primary security, distinguishing this venture from traditional municipal bonds reliant on tax revenues or project cash flows.
Leading the Charge in Bitcoin Adoption
New Hampshire Governor Kelly Ayotte embraced the initiative as a strategic approach to attract investment while mitigating financial risks for residents. “I’m proud that New Hampshire is once again first in the nation to embrace new technologies with this historic Bitcoin-backed bond,” Ayotte stated, emphasizing that it is an innovative method to enhance investment opportunities without compromising state funds or taxpayer dollars.
Structured as a standard conduit bond, the credit risk associated with this bond lies with the private borrower rather than the state’s general fund. However, the bond’s unique aspect is its collateral mechanism: the borrower is required to deposit approximately 160 percent of the bond’s notional value in Bitcoin, which will be securely managed by BitGo, a renowned digital asset custodian. In the event of a price decline, triggering the collateral ratio to fall near 130 percent, part of the collateral would automatically be liquidated to protect bondholders and sustain their investment.
This novel bond structure has been crafted by Wave Digital Assets and Rosemawr Management, with BitGo overseeing asset custody and Orrick, Herrington & Sutcliffe providing legal counsel. Wave co-founder Les Borsai expressed that this transaction signifies “the opening of a new debt market,” illustrating the potential for public and private sector collaboration to responsibly harness the value of digital assets. Orrick partner Orion Mountainspring echoed this sentiment, dubbing the bond a potential “game-changer for digital currency and municipal finance.”
Any fees and Bitcoin value appreciation resulting from this bond will funnel into a dedicated Bitcoin Economic Development Fund, aimed at fostering innovation and business growth within the state rather than contributing to the general budget. Additionally, this initiative aligns with New Hampshire’s recently established Strategic Bitcoin Reserve, which allows up to 5 percent of state treasury funds to be allocated into highly liquid digital assets, effectively making Bitcoin the primary candidate under current market conditions.
Republican representative Keith Ammon, the architect behind much of the state’s Bitcoin legislation, has endorsed this framework as a controlled method to evaluate Bitcoin as high-grade collateral for public finance without exposing taxpayers to potential losses. Given that the bond is not classified as a general-obligation security and incorporates over-collateralization alongside predetermined liquidation thresholds, officials believe that the volatility associated with Bitcoin is effectively contained within this structure.
The future scalability of this model beyond its initial rollout hinges on aspects such as investor demand, pricing dynamics, and how ratings agencies respond when a borrower seeks to bring a deal to market. Nevertheless, New Hampshire has successfully transitioned the concept of Bitcoin-backed public debt from theoretical discussions to practical applications within U.S. municipal finance, serving as a template that other states and municipalities may seek to replicate.
As of the latest updates, Bitcoin is trading at $91,401.
