Bitcoin enters the public bond market as Moody’s gives a first-of-its-kind crypto deal a rating
A New Hampshire state authority is set to issue a first-of-its-kind bitcoin-backed bond with a Ba2 rating, marking an early test of how crypto can function as collateral inside traditional public finance markets.
What to know:
- The New Hampshire Business Finance Authority plans to issue what appears to be the first rated bitcoin-backed bond, provisionally graded Ba2 by Moody’s, signaling a new intersection of crypto and public finance.
- The bonds are backed by bitcoin held in custody by BitGo.
- The securities are limited-recourse and do not put New Hampshire’s public funds at risk, underscoring that the state is acting as a conduit issuer as rating agencies refine methods for evaluating crypto-backed debt.
The New Hampshire Business Finance Authority is set to issue what appears to be the first rated bitcoin-backed bond of its kind, marking a step toward integrating crypto into traditional public finance.
The bonds received a provisional Ba2 rating from Moody’s Ratings, two notches below investment grade. They will be issued through the Business Finance Authority of the State of New Hampshire and are backed by bitcoin held as collateral, according to a press release.
“The Rated Bonds will be collateralized by a loan… backed by Bitcoin, a digital currency,” Moody’s said in its report.
The structure relies on bitcoin rather than cash flow from a business. Bondholders are repaid through the liquidation of BTC held in custody by BitGo, which will be sold if needed to meet interest and principal payments. The deal includes safeguards common in structured credit, including 1.6x overcollateralization and triggers that force liquidation if the loan-to-value ratio deteriorates.
Moody’s said its rating reflects “risks associated with the transaction’s collateral, structure and operation,” including bitcoin’s volatility. The agency used a 72% advance rate and short liquidation windows to model potential downside scenarios.
