New Hampshire’s first-of-its-kind Bitcoin-backed municipal bond has moved closer to launch after Moody’s Investors Service assigned it a provisional credit rating on Tuesday. The agency gave the project a provisional Ba2 rating, placing it within the speculative grade category and indicating that the bonds carry substantial credit risk. A provisional rating means Moody’s has reviewed the necessary documentation but is still awaiting certain final legal materials before issuing a definitive judgment.
The rating is considered a significant milestone for the proposed bond, as credit assessments allow institutions to evaluate risk and inform investment decisions. Some institutional investors operate under mandates that restrict them to investment-grade assets only, meaning the Ba2 designation may limit the pool of eligible buyers. The Ba2 level sits one tier below investment-grade status, signaling a speculative nature to prospective investors.
Moody’s identified Bitcoin’s price volatility as the primary driver behind the risk assessment. In its analysis, the agency noted a 72.06% advance rate and a two-day exposure period as assumptions consistent with its methodology, both corresponding to the Ba2 rating for Bitcoin collateral. The agency added that the advance rate reflects an evaluation of Bitcoin’s historical volatility and liquidity profile.
While data suggests Bitcoin’s volatility has been gradually declining, it continues to exceed that of assets such as gold and major stock indexes. S&P Global noted in a report earlier this month that Bitcoin’s volatility remains significantly higher than both the Nasdaq-100 and gold, driven by factors specific to the broader crypto ecosystem. This persistent volatility remains a central concern for rating agencies assessing crypto-backed financial instruments.
The New Hampshire Business Finance Authority approved the municipal Bitcoin-backed bond project in November, positioning the state as the first in the world to pursue such an initiative. The program is structured to begin with $100 million worth of bonds, allowing companies to borrow against overcollateralized Bitcoin holdings. BitGo Trust Company Inc. is serving as custodian for the Bitcoin collateral underpinning the project.
The bond was designed by asset manager Wave Digital Assets in collaboration with bond specialist Rosemawr Management. The next step in the process involves pricing the product before it enters the market, though no official launch date has been announced. Fees generated through the program are intended to fund the creation of the Bitcoin Economic Development Fund, which the BFA says will support business growth and financial innovation across New Hampshire.
Originally reported by CoinTelegraph.
