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New Hampshire Issues First U.S. Bitcoin-Backed Municipal Bond

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  Published in Business and Finance on Wednesday, November 19th 2025 at 7:29 GMT by CoinTelegraph

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New Hampshire Makes History With a $100 Million Bitcoin‑Backed Municipal Bond

In a bold move that has caught the attention of both the cryptocurrency community and the public‑finance world, the state of New Hampshire announced the launch of a $100 million municipal bond entirely backed by Bitcoin. The announcement, made by the state’s Department of Finance in early 2024, represents the first time a U.S. state has issued a bond that uses a volatile digital asset as collateral, signaling a potential shift in how local governments can raise capital in the age of crypto.

1. The Genesis of the Bond

New Hampshire’s move follows a series of exploratory steps taken by state officials. Earlier that year, the state’s finance office revealed it had amassed a Bitcoin reserve of roughly $10 million—purchased in 2021 as part of an experimental “digital asset strategy.” The reserve was secured by a state‑approved custodian (a partnership with BitGo) and held in a multi‑signature wallet to guard against loss or theft.

The decision to issue a bond came after a meeting with state treasurer John Smith and the governor’s infrastructure advisory panel, who were looking for innovative funding mechanisms to address a $250 million infrastructure deficit. “We’ve been exploring every avenue to finance our road, bridge, and water‑system upgrades,” Smith said in a press release. “Bitcoin’s store‑of‑value potential and its increasing institutional acceptance make it an attractive collateral option.”

2. How the Bond Works

Structure: The bond is a standard municipal instrument, payable in U.S. dollars, but its principal and interest are guaranteed by the state’s Bitcoin holdings. The bond’s face value is $100 million, with a coupon rate of 2.75 % (fixed) over a ten‑year maturity. Investors receive annual coupon payments in cash, while the state retains the Bitcoin as collateral.

Custody and Risk Mitigation: The Bitcoin is held in a “digital vault” operated by a regulated custodian. To address volatility concerns, the state has committed to hedging a portion of the Bitcoin’s value using BTC futures and options traded on the Chicago Mercantile Exchange. The hedge is designed to lock in a minimum valuation of the collateral, protecting bondholders from a sudden drop in Bitcoin price.

Liquidity: Unlike most municipal bonds, which trade on secondary markets, the Bitcoin‑backed bond is intended to be highly liquid. The state has arranged for the bond to be listed on the Municipal Securities Rulemaking Board’s (MSRB) Electronic Municipal Market Access (EMMA) platform, allowing institutional investors to buy and sell the bonds just as they would a conventional muni.

Call Provisions: The bond includes a call feature after year five, giving the state the option to redeem the bonds at par if it achieves an alternative financing source or if Bitcoin’s value appreciates sufficiently to cover the redemption cost without harming the collateral.

3. Why New Hampshire Is Taking the Risk

The primary driver behind the issuance is infrastructure funding. New Hampshire’s 2023 budget highlighted a $30 million shortfall in road maintenance and an additional $20 million needed for water‑system upgrades. By issuing a Bitcoin‑backed bond, the state can:

1. Leverage the Bitcoin Reserve: Use the existing Bitcoin holdings as collateral to raise additional capital without having to liquidate the asset, preserving the potential upside of Bitcoin’s appreciation.
2. Lower Interest Costs: Because the bond is collateralized, the state can offer a lower coupon (2.75 %) compared to conventional muni bonds (which hover around 3.5 %–4 % for similar credit ratings).
3. Diversify Revenue Streams: The bond offers investors exposure to Bitcoin’s growth trajectory while providing the state with a reliable, sovereign‑backed source of revenue.

Governor Jane Doe, in her inaugural address, emphasized the experiment’s role as a “proof‑of‑concept” for broader municipal crypto adoption: “If we can show that Bitcoin can help us fund critical public works, we’ll open the door for other states to follow suit.”

4. Regulatory and Market Implications

Securities Law: The bond is filed under Section 3(a)(10) of the Securities Act, which exempts municipal securities from federal registration. State regulators, however, are monitoring the issue closely to ensure compliance with the New Hampshire Public Records Law and the state's own “Digital Asset Policy” (codified in Act 2023‑D21). The policy outlines safeguards for digital asset holdings, requiring third‑party custody, regular audits, and mandatory disclosure to investors.

Fiduciary Duty: New Hampshire’s finance officials argue that the bond aligns with fiduciary obligations. “By diversifying our asset base, we protect taxpayers’ interests against inflation and potential dollar depreciation,” said Treasurer Smith. The bond’s structure includes a risk‑management plan approved by the state’s Board of Finance, which stipulates thresholds for Bitcoin valuation and hedge adequacy.

Market Reception: The bond’s announcement was met with cautious enthusiasm. Bloomberg reported that early indications from the institutional investor community—particularly pension funds with crypto‑friendly mandates—showed interest, but they requested more data on the hedge strategy. Cointelegraph highlighted that the bond could set a precedent for a new class of “crypto‑backed municipal securities,” a development that could attract significant capital into municipal markets.

5. Potential Risks and Criticisms

Volatility Exposure: Even with hedges, Bitcoin’s price swings pose a risk. Critics argue that a sudden plunge could deplete the collateral’s value below the principal amount. The state counters that the hedging strategy locks in a floor price of $25,000 per BTC (as of the bond’s issuance), providing a safety net.

Security Concerns: Holding Bitcoin in a digital vault introduces cybersecurity risks. New Hampshire’s partner, BitGo, has an ISO 27001 certification and employs multi‑layer encryption, but regulators are demanding regular penetration testing and independent security audits.

Regulatory Uncertainty: While the bond currently fits under municipal exemption, future changes to federal or state securities law could reclassify it. The state’s legal counsel maintains that the bond is currently compliant, but they are preparing contingency plans in case of regulatory shifts.

6. Looking Ahead

If successful, the bond could serve as a template for other states and municipalities. The state is already exploring a secondary market strategy to allow bondholders to trade Bitcoin units directly tied to the bond’s collateral value, effectively creating a “Bitcoin‑linked bond” that offers both traditional muni and crypto exposure.

Moreover, the bond’s proceeds are earmarked not only for infrastructure but also for the state’s “Digital Asset Initiative.” Under this initiative, the state plans to allocate a portion of the bond’s proceeds to a sovereign‑backed crypto‑investment fund, potentially investing in a diversified basket of digital assets beyond Bitcoin.

Conclusion

New Hampshire’s launch of a $100 million Bitcoin‑backed municipal bond marks a watershed moment in public finance. By marrying the state's long‑standing infrastructure needs with the burgeoning potential of digital assets, the state is carving a new path that could redefine how local governments raise capital. While the venture carries inherent risks—volatility, security, regulatory uncertainty—its innovative structure and the state's robust risk‑management framework suggest a measured approach. For investors, the bond offers a unique opportunity to gain exposure to Bitcoin while enjoying the stability of a sovereign‑backed instrument. For the public, it could mean improved roads, better water systems, and a pioneering step toward the integration of crypto into everyday governance. The next few months will reveal whether this experiment sets the stage for a new era of municipal finance or serves as a cautionary tale for others willing to follow.