New Hampshire Approves World's First Bitcoin-Backed Municipal Bond. 'It's the Opening of a New Debt Market'
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A $100 million Bitcoin-backed municipal bond, the first to be collateralized by the cryptocurrency, was approved in New Hampshire last month.
The bond still has to be approved by New Hampshire Gov. Kelly Ayotte and the state Executive Council before it's issued, the New Hampshire Business Finance Authority said in a statement. Ayotte has said she supports the measure.
"I'm proud that New Hampshire is once again first in the nation to embrace new technologies with this historic Bitcoin-backed bond," she said in the BFA's statement. "This is an innovative way to bring more investment opportunities to our state and position us as a leader in digital finance without risking state funds or taxpayer dollars."
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Borrowers will post 160% of the bond's value in Bitcoin as collateral under the proposed bond structure, according to media reports. Transaction fees will be used to create a Bitcoin Economic Development Fund that will allow the BFA to invest in business growth and financial innovation programs across the state, the office said in its statement.
If Bitcoin falls below 130% of the bond's value, a liquidation mechanism would force the cryptocurrency to be sold so bondholders don't lose money, according to media reports.
New Hampshire leads in crypto innovation
The creation of a Bitcoin-backed municipal bond comes six months after New Hampshire became the first state to establish a strategic bitcoin reserve.
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The law also allows the state's treasurer to invest up to 5% of state funds in digital assets that have a market capitalization of $500 billion or more. Bitcoin is the only digital asset that meets those qualifications.
New Hampshire officials established the Bitcoin-backed bond by working with digital asset companies like BitGo, which will serve as the Bitcoin custodian, and Wave Digital Assets, which helped conceptualize the bond's structure.
"This isn't just one transaction, it's the opening of a new debt market," Wave Digital Assets co-founder Les Borsai said in the BFA's statement. "We believe this structure demonstrates how public and private sectors can collaborate to responsibly unlock the value of digital assets and digital asset reserves."
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