A groundbreaking development in municipal finance has emerged in New Hampshire with the approval of a $100 million Bitcoin-backed municipal bond, marking the first instance of such a bond being collateralized by cryptocurrency. This innovative financial instrument is currently awaiting further approval from Governor Kelly Ayotte and the state Executive Council.
Governor Ayotte has publicly expressed her support for the initiative, highlighting New Hampshire’s pioneering role in embracing emerging technologies. “I’m proud that New Hampshire is once again first in the nation to embrace new technologies with this historic Bitcoin-backed bond,” she stated. “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.”
Under the proposed bond structure, borrowers will be required to post 160% of the bond’s value in Bitcoin as collateral. This substantial requirement aims to provide a safety net for investors. In the event of a decline in Bitcoin’s value, a built-in liquidation mechanism is designed to safeguard bondholders’ investments by triggering a sale of the cryptocurrency if its value dips below 130% of the bond’s worth.
Additionally, the transaction fees generated from this bond will be allocated to establish a Bitcoin Economic Development Fund. This fund will empower the New Hampshire Business Finance Authority (BFA) to invest in initiatives that promote business growth and financial innovation statewide.
This announcement follows closely on the heels of New Hampshire’s designation as the first state to create a strategic Bitcoin reserve just six months prior. The new law allows the state treasurer to invest up to 5% of state funds into digital assets with a market capitalization exceeding $500 billion, with Bitcoin being the only digital asset that meets this criteria.
The formulation of the Bitcoin-backed bond has involved collaboration with key players in the digital asset space, including BitGo, which will act as the custodian for the Bitcoin, and Wave Digital Assets, which played a pivotal role in conceptualizing the bond’s structure. Les Borsai, co-founder of Wave Digital Assets, remarked, “This isn’t just one transaction, it’s the opening of a new debt market. We believe this structure demonstrates how public and private sectors can collaborate to responsibly unlock the value of digital assets and digital asset reserves.”
As New Hampshire takes these bold steps towards integrating cryptocurrency into municipal finance, it raises questions about the future landscape of public finance and how other states might follow suit. The approval of this bond could pave the way for further innovations in financing, potentially reshaping the economic landscape in the coming years.
