New Hampshire Approves Bitcoin-Backed Municipal Bond

Bitcoin (BTC) is on the brink of a historic step. New Hampshire has approved the first municipal bond backed by Bitcoin in the U.S., opening a significant door for the entry of digital assets into the global debt market. This development is being closely monitored by investors.

The New Hampshire State's Business Finance Authority (BFA) has approved a total of $100 million in Bitcoin-backed conduit bonds, implementing a revolutionary model in traditional fixed income markets. In this process, neither the state's budget nor taxpayers bear any risk; the BFA merely acts as an intermediary that approves and oversees the structure. The security for investors is ensured by Bitcoin that is overly collateralized and held by BitGo.

This historic step came after New Hampshire passed a law allowing the state treasury to invest in digital assets. Governor Kelly Ayotte described this development as an “innovative financial opening,” stating that they aim to strengthen the state’s leadership claim in the digital finance space.

Looking at how the Bitcoin-backed bond operates, it is designed as a product compliant with traditional bond rules by Crypto asset manager Wave Digital Assets and municipal bond expert Rosemawr. The borrowing party deposits collateral in Bitcoin amounting to about 160% of the bond's value. If the collateral level falls below 130%, automatic liquidation kicks in to protect investors. This model allows companies that want to borrow to create capital without selling Bitcoin. State Representative Keith Ammon emphasized that this bond serves as a "sandbox testing how Bitcoin can work as high-quality collateral in public financing." Potential profits and transaction fees will be directed to the state’s Bitcoin Economic Development Fund.

The significance of New Hampshire's move lies in not only creating a product but also potentially integrating Bitcoin into a sector with a global debt market worth approximately $140 trillion. If this model succeeds, it could serve as an inspiration for other states and countries. Wave co-founder Les Borsai stated that this structure will pave the way for “Bitcoin’s safe integration with traditional finance, becoming an active economic tool.” With increasing institutional interest, more Bitcoin-backed bonds, credit products, and derivative structures are expected to emerge.

In conclusion, New Hampshire's strategic move demonstrates that digital assets are beginning to take on a more active role beyond being mere instruments for trading and are increasingly involved in the real economy and public financing. For investors, monitoring these new use cases for Bitcoin is of great importance.