New Hampshire Breaks New Ground with Bitcoin-Backed Municipal Bonds

A Historic First in Digital Asset Finance

In a groundbreaking move that signals the growing intersection of cryptocurrency and traditional finance, Moody’s Ratings has provisionally assigned Ba2 ratings to a $100 million bond offering that represents something truly unprecedented in American municipal finance. The Business Finance Authority of the State of New Hampshire is preparing to issue taxable revenue bonds backed entirely by bitcoin, marking what could be a watershed moment for how state authorities approach digital asset financing. Unlike traditional municipal bonds that rely on tax revenues or specific project income streams, these bonds derive their security solely from bitcoin held as collateral. The deal, known as the Waverose Finance Project, is structured through the NH Cleanspark Borrower Trust 2026-1, with the state authority serving as lender. What makes this particularly noteworthy is that it represents the first time a state-affiliated authority has ventured into issuing publicly traded bonds secured exclusively by cryptocurrency, potentially opening the door for similar innovative financing structures across the country.

Understanding the Bond Structure and Payment Terms

The bond issuance is divided into two distinct classes—Series 2026A-1 and Series 2026A-2—both scheduled to mature in 2029. Each class comes with a fixed coupon rate, providing bondholders with predictable interest payments throughout the life of the investment. However, the Series A-2 bonds include an intriguing sweetener that sets them apart: investors in this class have the potential to receive additional payments when the bonds mature if bitcoin’s market value has increased since the original pricing date. This upside participation feature only kicks in after all principal amounts, interest obligations, and associated expenses have been completely satisfied, ensuring that the fundamental obligations of the bond are met before any profit-sharing occurs. It’s important to understand that these are limited recourse obligations, meaning that if things go wrong, bondholders can only look to the bitcoin collateral for repayment—they have no claim against other assets. Perhaps most critically for New Hampshire residents and taxpayers, no public funds from the state treasury back these bonds, and the issuing authority possesses no taxing power whatsoever to cover any potential payment shortfalls. The success or failure of repaying these bonds depends entirely on the value and successful liquidation of the bitcoin collateral held in trust.

The Custodial and Operational Framework

The infrastructure supporting these bonds involves several specialized service providers, each playing a critical role in the deal’s operational mechanics. Bitgo Bank & Trust, National Association, a federally chartered digital asset custodian, will serve as the primary guardian of the bitcoin collateral, holding it in segregated wallets specifically designated for bondholders. This segregation is crucial because it ensures that the collateral cannot be commingled with other assets and remains clearly identified as security for this particular bond issuance. When the time comes to convert bitcoin into dollars to make interest payments, principal repayments, or cover expenses, Bitgo Prime, LLC will step in as the liquidation agent, responsible for executing sales of the cryptocurrency under predetermined conditions. Wave Digital Assets LLC has been tapped to handle the day-to-day administrative functions of the transaction, managing the routine operational aspects that keep the deal running smoothly. Recognizing that continuity is essential in financial transactions, the structure also includes RM Digital Finance LLC, which will be formally appointed at closing as a backup administrator. This redundancy ensures that if Wave Digital Assets is unable or unwilling to continue its administrative duties for any reason, operations can continue without disruption, protecting bondholders from operational risk.

Collateral Management and Risk Triggers

At the heart of this innovative financing structure lies a sophisticated collateral valuation mechanism designed to protect bondholders from bitcoin’s notorious price volatility. The bonds are structured with an initial collateral coverage ratio of 1.60 times the bond value, meaning that at issuance, the bitcoin held as security is worth 60% more than the amount of bonds outstanding. This cushion provides a buffer against price declines, but the structure doesn’t stop there. A critical loan-to-value trigger has been established at 1.40 times coverage. If bitcoin’s market value drops sufficiently that the collateral coverage falls to this threshold level, the deal’s governance documents mandate an immediate and complete redemption of all outstanding bonds. This forced liquidation mechanism is designed to protect bondholders by ensuring that bitcoin is sold while there is still sufficient value to cover all obligations, rather than allowing the collateral to potentially decline further. In developing its Ba2 rating, Moody’s applied an advance rate of 72.06% and assumed a two-day exposure period for liquidation. These technical parameters reflect the rating agency’s assessment of both bitcoin’s historical price volatility patterns and the practical realities of how quickly large positions can be liquidated in cryptocurrency markets without causing excessive price impact. These figures aren’t arbitrary—they’re calibrated specifically to align with what Moody’s considers appropriate for a Ba2 rating level, balancing the bonds’ innovative nature with prudent risk management.

Assessing the Risks and Rating Methodology

Moody’s evaluation of these bonds required adapting traditional credit analysis frameworks to accommodate an entirely new type of collateral. The rating agency explicitly acknowledged that the effective liquidation of the bitcoin collateral depends on two fundamental assumptions: first, that the Bitcoin network itself continues to function as designed, and second, that the broader market infrastructure for trading and settling bitcoin transactions remains operational. In support of these assumptions, Moody’s noted that the Bitcoin network has demonstrated remarkable reliability throughout its history, maintaining continuous uptime without any significant network-wide outages that would prevent transactions from being processed. The methodology applied for this rating was Moody’s “Market Value Collateralized Loan Obligations” framework, which was published in May 2025 and provides guidelines for evaluating securities backed by volatile market-priced assets. The rating agency identified several factors that could potentially lead to rating changes in either direction. Positive rating action might result from stronger-than-expected collateral performance or structural enhancements that reduce risk, while negative rating action could stem from deterioration in collateral value, failure by the issuer to comply with transaction documents, or evidence that the liquidation mechanics don’t work as intended under stress conditions. Moody’s has indicated that a more detailed pre-sale report containing additional transaction specifics will be published on their website, providing potential investors with deeper insights into the deal structure. The provisional ratings were issued by Moody’s Investors Service, Inc., from their New York office, with Sumeet Sablok serving as the primary analyst and Leon Mogunov as the associate managing director overseeing the rating process.

Implications for the Future of Municipal Finance

This bond offering represents far more than just another financing transaction—it potentially marks the beginning of a fundamental shift in how state and local government authorities think about raising capital and what types of assets can serve as collateral for publicly issued debt. For decades, municipal finance has operated within well-established boundaries, with bonds backed by tax revenues, specific project cash flows, or traditional asset classes like real estate. By venturing into digital asset-backed securities, New Hampshire’s Business Finance Authority is testing whether cryptocurrency can be successfully integrated into the conservative world of public finance. The success or failure of this pioneering effort will undoubtedly influence whether other state and local authorities follow suit with similar structures. If the bonds perform well—making all scheduled payments and returning principal to investors without triggering the collateral coverage thresholds—it could validate bitcoin’s role as legitimate collateral for institutional financing and open the floodgates for similar deals across the country. Conversely, if bitcoin’s volatility causes problems, triggers forced liquidations, or results in losses for bondholders, it could set back the integration of digital assets into municipal finance for years. Beyond the immediate success or failure of this particular transaction, the deal raises interesting questions about the evolving relationship between government entities and cryptocurrency. While no taxpayer funds are at risk in this structure, the involvement of a state authority lends a degree of legitimacy to bitcoin as a financial asset that may influence broader acceptance. As cryptocurrency continues its journey from fringe technology to mainstream financial instrument, innovative structures like New Hampshire’s bitcoin-backed bonds will serve as important test cases, demonstrating whether digital assets can successfully coexist with—and perhaps eventually transform—the centuries-old world of government finance.