In brief
- New Hampshire’s Business Finance Authority has introduced a conduit bond that will allow firms and nonprofits to borrow against their Bitcoin holdings.
- The bond requires 160% overcollateralization and will result in liquidation if the value of Bitcoin falls below 130% of the value of the bond.
- Experts suggest that it could lead to other states following suit, amid growing interest in strategic crypto reserves.
New Hampshire’s Business Finance Authority (BFA) has announced a municipal bond that provides firms with the ability to borrow against Bitcoin holdings.
Worth $100 million, the new conduit bond is a first of its kind in the United States, and follows New Hampshire’s passage of a strategic crypto reserve bill in May.
The bond will provide financing to private firms and nonprofits seeking to undertake public works, with borrowers required to provide Bitcoin as collateral, worth 160% of the borrowed amount.
If the bitcoin-based collateral falls below 130% of the bond’s value, the position will be liquidated, a provision which ensures that lenders (i.e. bondholders) do not lose any money.
BFA Executive Director James Key-Wallace told Crypto in America that fees from bond transactions would be directed to the Bitcoin Economic Development Fund, which has the aim of supporting businesses and economic innovation in New Hampshire.
Key-Wallace also said that gains in the value of Bitcoin posted as collateral would be directed to the fund.
The state’s governor, Kelly Ayotte, celebrated the bond’s debut, describing it as an example of New Hampshire leading the way in embracing new technologies.
She 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.”
Because the Business Finance Authority is self-funded, state legislator Keith Ammon has described the bond as a proof-of-concept for the use of Bitcoin as collateral in government finance, one which could potentially lead to a Bitcoin bond issued by a state treasury.
Commentators outside of New Hampshire also recognize the bond’s potential for not only catalyzing Bitcoin’s growth, but widening its use and application.
“If successful, and I expect it will be, it will help to legitimize bitcoin beyond its current role as, mainly, a speculative asset,” Trade Nation Senior Market Analyst David Morrison told Decrypt.
Morrison suggests that it could indicate a route for Bitcoin to “be used more broadly” in debt markets, with the potential for gains from Bitcoin-based collateral a possible incentive for wider adoption.
“On the flip side, there may be a danger of a Bitcoin price collapse leading to a forced liquidation,” he added.
More broadly, Morrison expects this type of funding to become more widespread, particularly as numerous U.S. states make moves to introduce their own strategic crypto reserves.
“New Hampshire has already done a lot of the hard work, in terms of setting out the legalities and establishing precedent,” he said. “If this is a success, many other states could follow.”
Other industry figures agree, including CoinJar CEO Asher Tan, who tells Decrypt that New Hampshire’s move highlights Bitcoin’s potential as a store of value.
“It could inspire other states to consider similar approaches,” he said. “As more governmental and institutional players explore crypto-backed financial products, the market will likely see a boost in legitimacy and investor confidence, further driving mainstream adoption.”
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