New Hampshire’s pioneering municipal bond project, collateralized by Bitcoin, has received a provisional Ba2 “speculative” rating from Moody’s Investors Service. The rating agency cited Bitcoin’s historical volatility as the primary reason for the below-investment-grade score. The bond program, approved in November and structured with a $100 million initial offering, is designed to create a development fund for the state.
New Hampshire’s proposed Bitcoin-backed municipal bond has moved forward after receiving a provisional Ba2 rating from Moody’s Investors Service. This speculative grade indicates the bonds carry substantial credit risk, according to the agency’s assessment stated on Tuesday.
A bond rating is a key step for institutional assessment, as some investors are mandated to only purchase investment-grade assets. The provisional status means Moody’s has reviewed core documents but awaits final legalities before a final judgment.
The Ba2 rating is directly impacted by Bitcoin’s volatility, placing it one tier below investment grade. “Our analysis includes various assumptions consistent with our methodology, including a 72.06% advance rate and a two-day exposure period, corresponding to a Ba2 rating for Bitcoin collateral,” Moody’s wrote.
Data shows Bitcoin’s volatility has trended downward but remains significantly higher than assets like gold. S&P Global noted this volatility is driven by factors specific to the crypto ecosystem.
The New Hampshire Business Finance Authority (BFA) approved the world’s first state-issued Bitcoin-backed bond in November. The program will launch with $100 million in bonds, allowing companies to borrow against overcollateralized Bitcoin.
BitGo Trust Company Inc. will serve as custodian for the Bitcoin collateral. The project was designed by asset manager Wave Digital Assets in partnership with bond specialist Rosemawr Management.
Fees from the program will support the creation of a Bitcoin Economic Development Fund. The BFA stated this fund will allow reinvestment in programs promoting business growth and financial innovation across the state.
