New Hampshire has become the first state to approve a municipal bond backed by Bitcoin, a milestone that could open the door for digital assets to enter the $140 trillion global debt market.
The state's Business Finance Authority on Monday authorized a first-of-its-kind $100 million Bitcoin-backed conduit bond, allowing companies to borrow against over-collateralized Bitcoin held by a private custodian. The structure represents an unprecedented bridge between traditional fixed-income instruments and digital assets, applying municipal bond rules to cryptocurrency collateral for the first time in U.S. history.
While the BFA is a state entity, the bond does not expose taxpayers or state funds to any risk. The authority acts purely as a conduit, overseeing and approving the transaction without assuming repayment obligations. Investors are instead protected by Bitcoin held in custody by BitGo, with automatic liquidation mechanisms designed to ensure bondholders are made whole if the collateral's value declines.
Governor Kelly Ayotte celebrated the announcement as another example of New Hampshire's leadership in digital finance.
"I'm proud that New Hampshire is once again first in the nation to embrace new technologies with this historic Bitcoin-backed bond," Ayotte said. "This is an innovative way to bring more investment opportunities to our state and position us as a leader in digital finance without risking state funds or taxpayer dollars."
How the Bond Works
Crypto asset manager Wave Digital Assets designed the bond in partnership with municipal bond specialist Rosemawr Management. The structure applies traditional municipal and corporate bond rules to Bitcoin collateral, creating a compliant framework that institutional investors can evaluate using familiar metrics.
Under the proposed terms, borrowers will post approximately 160% of the bond's value in Bitcoin as collateral. If Bitcoin's price drops below roughly 130% of the bond's value, a liquidation mechanism triggers to ensure bondholders receive full payment. This over-collateralization cushion protects investors against Bitcoin's characteristic volatility while allowing borrowers to access capital without selling their holdings or triggering a taxable event.
Les Borsai, co-founder of Wave Digital Assets, described the bond as a step toward merging traditional fixed income with digital assets in a fully institutional and compliant manner.
"Our goal is to bridge traditional fixed income with digital assets in a way that's fully institutional, fully compliant, and globally scalable," Borsai said.
Top municipal bond law firm Orrick provided legal support for the transaction, helping New Hampshire structure the first municipal security backed by cryptocurrency.
"We are excited to support New Hampshire in launching the first municipal security backed by cryptocurrency," said Orion Mountainspring, partner at Orrick. "This is a game-changer for digital currency and municipal finance."
Fees Flow to Economic Development
The bond is designed to generate revenue for the state beyond simple financing. According to BFA Executive Director James Key-Wallace, fees from the transaction and any appreciation in the Bitcoin collateral will flow into the Bitcoin Economic Development Fund, a dedicated pool supporting innovation, entrepreneurship, and business growth across New Hampshire.
Republican Representative Keith Ammon, who introduced the state's Strategic Bitcoin Reserve legislation earlier this year, described the bond as effectively a sandbox for testing how Bitcoin can function as high-grade collateral in government finance.
"The BFA is self-funded, so they can partner on this structure, prove out the concept, and eventually it could lead to a true state treasury-issued Bitcoin bond," Ammon said.
The structure allows borrowers to unlock liquidity from their Bitcoin holdings without disposal, avoiding capital gains taxes while still putting the assets to productive economic use. If successful, the model could establish a template for other states seeking to integrate digital assets into public finance.
Building on Strategic Reserve
The bond follows New Hampshire's groundbreaking move in May to become the first state to authorize a strategic Bitcoin reserve. Governor Ayotte signed House Bill 302 into law, permitting the state treasury to invest up to 5% of certain public funds in digital assets with a market capitalization exceeding $500 billion, a threshold currently met only by Bitcoin.
The law requires any holdings to be kept in U.S.-regulated custody through either a state-controlled multi-signature wallet, a qualified custodian, or a U.S.-based exchange-traded product. The framework ensures compliance and transparency while allowing the state to build exposure to digital assets as a hedge against economic uncertainty.
Arizona had previously passed similar legislation, but Governor Katie Hobbs vetoed the bill in early May. Florida withdrew its own reserve bills from consideration around the same time. New Hampshire's willingness to move forward has positioned it as the clear leader among states exploring Bitcoin integration into public finance.
The combination of the strategic reserve and the new bond structure creates a comprehensive framework for Bitcoin in state-level government, spanning both asset accumulation and debt financing applications.
Opening a New Debt Market
Crypto-backed borrowing has existed in private markets for years through platforms offering loans against Bitcoin collateral. However, this marks the first time such a mechanism has entered U.S. municipal finance, a market traditionally characterized by conservative risk profiles, stable collateral, and decades-old underwriting standards.
The global bond market is valued at approximately $140 trillion, with the U.S. market alone accounting for roughly $58 trillion, making it the world's largest fixed-income market. If New Hampshire's model proves successful, it could set a blueprint for other states and eventually municipalities nationwide.
"This isn't just one transaction, it's the opening of a new debt market," Borsai said. "We believe this structure shows how public and private sectors can collaborate to responsibly unlock the value of digital assets and digital asset reserves."
Today, many cryptocurrency reserves sit idle, functioning as passive stores of value rather than active financial tools. Borsai envisions issuers eventually putting these reserves to work by earning yield, backing loans, and supporting economic projects, all within a fully regulated framework.
Achieving that vision requires institutional participation. Pension funds and retirement plans could potentially take carefully measured exposure to digital assets through instruments like the New Hampshire bond without increasing overall portfolio risk, since the over-collateralization and liquidation mechanisms provide downside protection similar to traditional secured debt.
Final thoughts
The bond arrives as institutional interest in digital assets continues to mature beyond spot exchange-traded funds. While Bitcoin ETFs have attracted tens of billions in inflows since launching in January 2024, the debt market represents a much larger pool of capital with different risk preferences and return requirements.
Borsai expects institutional interest to rise as the bond receives credit ratings, which would allow it to be evaluated alongside traditional municipal debt. Ratings would also pave the way for additional products built on fixed-income instruments and derivatives rather than equity-like exposure.
The structure's success will depend on how the Bitcoin collateral performs across different market environments, how rating agencies assess the novel risk profile, and whether investor demand materializes for an untested instrument. If the bond performs as designed, it could accelerate the integration of digital assets into mainstream public finance and attract capital that has remained on the sidelines waiting for compliant, institutional-grade products.
For New Hampshire, the bond reinforces its position at the forefront of state-level crypto adoption. Having beaten the federal government to establishing a Bitcoin reserve and now launching the first municipal bond backed by cryptocurrency, the Granite State has created a real-world laboratory for testing how digital assets can function within traditional government finance structures.