Bitcoin enters the public debt market, and Moody's issues the world's first crypto-backed bond rating.

Original author: Sanqing, Foresight News

On March 31, Moody’s Ratings gave a provisional credit rating of Ba2 to a bitcoin-collateralized bond issued by the New Hampshire Business Finance Authority (New Hampshire BFA). This is the first time in the history of traditional rating agencies that they have conducted a credit assessment of bitcoin-collateralized municipal bonds.

Source: MOODY’S Ratings & Regulatory

What is this bond?

This is a $100 million bitcoin-backed taxable income bond linked to the Waverose Finance Project, divided into two series, 2026A-1 and 2026A-2, both of which mature in 2029.

The bond is structured by Wave Digital Assets, with Rosemawr Management serving as investment manager and Orrick providing legal services. Fees received by the BFA from the transaction will be used to create the “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 with bitcoin 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 converted to cover the expenses. The bond also includes a provision that is relatively favorable to bondholders. If, at maturity, the bitcoin price is higher than the pricing date, holders of the A-2 series are entitled to an additional BTC yield-sharing allocation after full payment of interest and principal.

Compared with bitcoin lending tools on platforms such as Coinbase, the biggest significance of this bond is that it was the first to give cryptocurrency a path to finance within the public bond market. Borrowers no longer rely on private loans from centralized platforms; instead, under a compliant framework, they tap institutional capital at scale and at low cost through publicly issued bonds that have received traditional credit ratings.

How institutions assess bitcoin risk

In its report, Moody’s said that the provisional rating primarily reflects risks related to the collateral, the structure, and operations, with bitcoin’s high volatility as the primary consideration.

To hedge against price fluctuations, the issuance structure introduces a 1.6x overcollateralization requirement, meaning the value of the BTC collateral must always remain at more than 160% of the debt exposure.

Once the collateralization ratio falls to the 1.4x trigger level (i.e., LTV deteriorates to about 71%), a mandatory full redemption mechanism will be triggered: the bond will be called early, and the bitcoin will be liquidated to repay the debt.

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 will trigger mandatory repayment, the bond will mature early, and the bitcoin will be sold to fund the repayment.

In the rating report, Moody’s used a 72% advance rate and a shorter liquidation window to assess conservatism, simulating an extreme scenario in which the bitcoin price drops by about 28% from the pricing date. The tests showed that even with an initial 1.6x overcollateralization and a 1.4x trigger mechanism, sufficient protection is still provided—supporting the Ba2 rating result.

This parameter design is fairly conservative. But for an asset whose historical drawdowns have often exceeded 50%, this conservatism may also be the premise for Moody’s to be willing to issue a rating.

Another detail worth noting separately is that although this bond is branded under the name of the New Hampshire Business Finance Authority, it has no connection to the state’s public credit. Moody’s explicitly stated in the report that no public funds from the state may be used to repay the bond.

Structurally, the issuer plays the role of a “conduit issuer.” It provides the issuance channel and a nominal credit endorsement, but assumes no credit backstop responsibility.

This kind of structure is not uncommon in the traditional municipal bond market, and is typically used for financing special projects such as healthcare and education.

Why this deal matters

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

In the past few years, institutions’ attitudes toward bitcoin have gone through three phases: from keeping it out, to holding it as an asset (BTC reserves on corporate balance sheets), and then to using it for collateralized financing (pledging BTC to obtain fiat loans). This bond marks the beginning of a fourth phase: bitcoin entering the realm of publicly rated debt instruments as the underlying collateral, moving onto a track within the traditional public finance market.

That track means three things: it opens a window for institutional investors to gain indirect bitcoin exposure through compliant channels; it prompts Moody’s to begin building rating methodologies for crypto collateral, attracting more rating agencies to follow suit; and it proves the underlying logic of bitcoin as a kind of “interest-bearing asset” under certain conditions—not merely as a zero-yield hold.

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

A Ba2 rating, in plain terms, is at “junk bond” level. But that label itself is prone to mislead. In Moody’s rating scale, Ba2 sits in the second tier of the speculative grade, leaving a substantial distance from the bottom of the rating spectrum (C/D).

Tesla only received S&P and Moody’s investment-grade ratings in the 2022 to 2023 period, while Ford still remains speculative grade (Ba1) in the Moody’s system to this day; in the S&P system, it has also only barely kept its lowest investment-grade tier and carries a negative outlook. This does not prevent them from becoming important allocation targets for institutional investors.

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

Finally, 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 well. As pricing experience accumulated and structural standards matured, ratings often rose accordingly. In that sense, Ba2 is only a starting point.