Original Title: 《Bitcoin Enters the Public Debt Market, and Moody’s Issues the First-Ever Global Credit Rating for Crypto-Backed Bonds》

Original Author: Sanqing, Foresight News

On March 31, Moody’s Ratings assigned a provisional credit rating of Ba2 to a bond backed by Bitcoin that the New Hampshire BFA (New Hampshire BFA) issued in the United States. This is the first time in the history of traditional credit rating agencies that they have conducted a credit assessment of a Bitcoin-collateralized municipal bond.

Source: MOODY’S Ratings & Regulatory

What is this bond

This is a $100 million Bitcoin-supported taxable income bond linked to the Waverose Finance Project, split into two series, 2026A-1 and 2026A-2, both maturing in 2029.

The bond is structured by Wave Digital Assets, with Rosemawr Management serving as investment manager and the law firm Orrick providing legal services. The fees that BFA earns from the transaction will be used to create a “Bitcoin Economic Development Fund.”

The core of the bond structure is that it does not rely on the cash flows of any entity; instead, it is repaid directly using Bitcoin as collateral. The Bitcoin collateral is held in custody by BitGo Trust Company, Inc., and is placed in regulated cold storage.

When the borrower needs to pay interest or repay principal, the collateral will be liquidated and monetized to cover the expenses. The bond also includes a term that is relatively favorable to holders. If holders of the A-2 series have the Bitcoin price higher than the pricing date at maturity, they are entitled to receive an additional BTC收益分成 after full payment of principal and interest.

Compared with Bitcoin lending tools on platforms like Coinbase, the biggest significance of this bond is that it is the first to give cryptocurrency an opportunity to raise financing in the public debt market. Borrowers no longer rely on private loans from centralized platforms; instead, they tap institutional capital at scale and at low cost through publicly issued bonds that have received traditional credit ratings, within a compliant framework.

How institutions assess the risk of Bitcoin

In its report, Moody’s said the provisional rating primarily reflects risks related to the collateral, structure, and operations, with Bitcoin’s high volatility being the top consideration.

To hedge price volatility, the issuance structure introduces a 1.6x overcollateralization requirement: the value of the BTC collateral must always remain above 160% of the debt exposure.

Once the collateralization ratio falls to the trigger line of 1.4x (i.e., the LTV deteriorates to about 71%), it will trigger a mandatory full redemption mechanism. The bond will mature early, and the Bitcoin will be liquidated to repay.

In other words, if you borrow $100, you must collateralize at least $160 worth of Bitcoin. If the collateral value drops below $140, the system triggers mandatory repayment, the bond matures early, and the Bitcoin is sold to repay.

For conservatism in its rating report, Moody’s used an advance rate of 72% and a shorter liquidation window to simulate an extreme scenario in which the Bitcoin price drops by about 28% from the pricing date. The tests showed that an initial 1.6x overcollateralization and a 1.4x trigger mechanism still provide sufficient protection, thereby supporting the Ba2 rating outcome.

These parameter choices are quite conservative. But for an asset whose historical drawdown can easily exceed 50%, this conservatism may also be the premise under which Moody’s is willing to issue a rating.

Another detail worth stating separately is that although this bond is named after the New Hampshire BFA, it has no connection to the state’s public credit. Moody’s clearly stated in the report that no public funds from the state may be used to repay this bond.

Structurally, the issuer acts as a “conduit issuer.” It provides the issuance channel and a nominal backstop, but does not assume any credit support obligation.

This kind of structure is not uncommon in the traditional municipal bond market; it is typically used to finance special projects such as healthcare and education.

Why this transaction matters

To understand the historical significance of this bond, it needs to be placed in a broader context.

Over the past few years, institutional attitudes toward Bitcoin have gone through three stages: from being shut out, to being held as an asset (BTC reserves on corporate balance sheets), and then to financing with Bitcoin as collateral (pledging BTC to obtain fiat loans). This bond marks the beginning of the fourth stage: Bitcoin, as underlying collateral for publicly rated debt instruments, has moved onto the track of traditional public finance markets.

This track means three things: opening a window for institutional investors to gain indirect exposure to Bitcoin through compliant channels; prompting Moody’s to build rating methodologies for crypto collateral and attracting more rating agencies to follow suit; and proving the underlying logic that—under certain conditions—Bitcoin can serve as an “interest-bearing asset,” not merely as a zero-interest holding.

This bond is not an isolated event. In the same period, the U.S. Department of Labor, based on President Trump’s executive order, released a proposal to expand the range of digital assets available in retirement investment portfolios. Multiple states are considering legislation for “Bitcoin strategic reserves.” New Hampshire is also the first U.S. state to pass a law establishing crypto currency reserves.

On its face, the Ba2 rating is on the “junk bond” level, but the label itself is prone to be misleading. In Moody’s rating scale, Ba2 sits in the second tier of the speculative grade, still a considerable distance from the bottom of the rating range (C/D).

Tesla only received investment-grade ratings from S&P and Moody’s in 2022 to 2023, in sequence. As for Ford, it still remains speculative grade (Ba1) within the Moody’s system. In the S&P system as well, it has only barely retained the lowest investment-grade tier and comes with a negative outlook. This does not prevent them from being important allocation targets for institutional investors.

Second, the fact that this bond can obtain a Ba2 rather than a lower rating in itself indicates that the 1.6x overcollateralization plus the mandatory liquidation mechanism passed the relevant scenario simulations in Moody’s stress testing. So what Ba2 reflects is conservatism in the structural design, not a simple denial of the Bitcoin asset itself.

Looking at historical precedents, when the first MBS (mortgage-backed securities) and the first green bonds entered the rating system, they experienced a similar starting point. As pricing experience accumulated and structural standards matured, ratings often rose accordingly. In that sense, Ba2 is only a starting point.

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