Why Were Bitcoin Municipal Bonds Rejected? A New Hampshire Case Reveals Regulatory Barriers

On July 8, 2026, the New Hampshire Executive Council rejected a $100 million Bitcoin-collateralized municipal bond proposal by a 3-to-2 vote. Backed by the New Hampshire Banking and Financial Management Authority (BFA) and publicly supported by Governor Kelly Ayotte, the plan was expected to become the world’s first municipal bond backed by Bitcoin as its underlying asset. The proposal’s failure was not only a setback for local policy, but also reflected deeper structural obstacles faced by crypto assets as they move from private investment tools toward public finance infrastructure.

What exactly does this proposal aim to do

In November 2025, the New Hampshire Banking and Financial Management Authority approved the bond’s initial framework. The plan was to issue taxable revenue bonds of up to $100 million. The bonds were designed using a “conduit” structure: a private borrower—NH CleanSpark Borrower Trust 2026-1, associated with the Bitcoin mining company CleanSpark—would raise debt through a conduit entity established by the state government. New Hampshire would only serve as the issuing conduit and provide oversight, without assuming any obligation to repay principal and interest on the bonds.

Bond proceeds would be used to fund CleanSpark’s purchase of Bitcoin, as well as to pay issuance-related fees. The borrower was required to provide overcollateralization using Bitcoin held in cold wallets managed by BitGo, with a collateralization ratio of approximately 160%—meaning that for each $1 of bond face value, there would be about $1.60 worth of Bitcoin as collateral. If the collateral value fell to 140% of the bond’s face value, it would trigger a mandatory liquidation and an early redemption mechanism.

In March 2026, Moody’s assigned the bond a preliminary Ba2 rating, placing it in the speculative category (i.e., “junk bonds”). The rating primarily reflected credit uncertainty driven by Bitcoin price volatility. The underwriter was Jefferies, and the structure was designed by Wave Digital Assets and Rosemawr Management.

Why the Executive Council voted against it

The New Hampshire Executive Council consists of five members and reviews major financial actions at the state level. After the public hearing on July 8, the council voted. The “no” votes came from the lone Democratic member Karen Liot Hill, as well as Republican members Janet Stevens and David Wheeler; the “yes” votes came from Joseph Kenney and John Stephen. Notably, the opposition cut across party lines—this was not simply a clash of political parties, but a form of systemic caution by public finance officials toward an emerging asset class.

At the hearing, Liot Hill stated clearly: “I’m not against Bitcoin or crypto itself. But I think that, as a state, we are being asked to confer a kind of legitimacy on a financial transaction—one that comes from an emerging asset class that has been proven to be highly volatile.” She had moved to table the proposal, but no colleague seconded it; in the end, it directly led to the proposal being rejected.

Although the “no” reasons offered by council members David Wheeler and Janet Stevens were not elaborated in public reporting, the voting pattern indicates that concerns about volatility risk went beyond party lines. Even in New Hampshire—where crypto is relatively welcomed, and where in 2025 the state became the first in the U.S. to pass a strategic Bitcoin reserve law—public finance officials still took a cautious view of using Bitcoin as collateral for municipal bonds.

Why supporters viewed it as a “historic” opportunity

Governor Kelly Ayotte and the BFA framed the proposal as “groundbreaking” and “historic,” arguing that it would help New Hampshire gain a first-mover advantage in attracting digital finance innovators. Ayotte signed HB 302 into law in 2025, giving the state treasurer discretionary authority to invest up to 5% of public funds in Bitcoin. At the hearing, she said: “When our innovation can protect taxpayers, that’s the direction we should seriously consider.”

BFA Executive Director James Key-Wallace emphasized that the plan offered “zero risk” to New Hampshire taxpayers. Because of the conduit structure, the state government bore no repayment responsibility; even if Bitcoin’s price collapsed, the state would not have to repay any funds. Instead, if Bitcoin’s price rose significantly during the bond’s three-year term, the BFA could collect millions of dollars in fees, which would be used to support in-state projects such as small businesses, childcare services, housing, and economic development. Key-Wallace also said the deal could bring “more follow-on transactions.”

After the proposal was rejected, Keith Ammon, the majority leader in the New Hampshire House of Representatives, said bluntly that it was an “extremely short-sighted decision,” and noted that the council members were in an election year—“it only takes one vote to turn things around, and we won’t give up.”

Why the risk-mitigation mechanisms failed to convince opponents

Even though supporters repeatedly emphasized “zero risk for taxpayers” and 160% overcollateralization, opponents’ core concern was not the state government’s direct financial liability, but deeper institutional issues.

First, volatility risk cannot be fully eliminated through overcollateralization. A 160% collateralization ratio provides roughly a 60% buffer against price declines, but Bitcoin’s historical volatility shows that under extreme market conditions, drawdowns of 50% are not without precedent. Once the 140% liquidation threshold is triggered, forced close-outs could further intensify downward pressure in the market, creating a negative feedback loop.

Second, the “zero risk” narrative faces a trust deficit in a public finance context. Liot Hill’s skepticism is representative: “Your future projections might be accurate and there might be nothing to worry about—but there might also indeed be something to worry about.” The core principle of public finance is certainty, not a premium for volatility. The private sector can hold Bitcoin as reserves or issue debt backed by it, but the government cannot absorb large swings in asset prices the way a company can.

Third, the political cost of legitimizing an endorsement. Opponents’ most fundamental worry is that by approving the transaction, the state government would effectively be endorsing an emerging asset class. Even if the state bears no direct financial risk, the Executive Council’s approval itself conveys a signal of institutional recognition. For public officials, the political risk of this “implicit guarantee” is far greater than the direct financial exposure.

What Moody’s Ba2 rating indicates about acceptance and reservations in credit markets

Moody’s Ba2 temporary rating was an important step toward the bond gaining recognition in credit markets. Ba2 is speculative—two notches below investment grade—and mainly reflected uncertainty stemming from Bitcoin price volatility. The rating itself is a double-edged sword: on one hand, it suggests that traditional credit rating agencies are willing to incorporate crypto collateral into their assessment frameworks, marking a milestone for crypto assets entering mainstream fixed-income markets; on the other hand, a speculative rating also means investors must bear the risk of severe volatility in crypto markets.

Moody’s rating logic was built on a series of strict assumptions—including the custody security provided by BitGo, the effectiveness of the forced liquidation mechanism, and CleanSpark’s creditworthiness as the borrower. But these assumptions did not earn full trust from the Executive Council at the level of public finance approvals. The rating answered the question of whether the bond could be priced, but it did not resolve the question of whether the government should participate.

What this rejection means for crypto’s public finance process

New Hampshire’s rejection is not an isolated case; it is a microcosm of the systemic barriers crypto assets face as they move from private markets into the public sector. Even in a state that was the first to pass a strategic Bitcoin reserve law, public finance officials remained cautious about including Bitcoin in the municipal bond collateral pool.

This case reveals several key structural thresholds:

Institutional inertia. The public finance system is built around fiat currency and traditional asset classes, with legal frameworks, risk models, and approval processes developed over decades. Introducing crypto assets not only requires technical innovation, but also a full recalibration of the institutional ecosystem.

A trust gap. Supporters used narratives such as “zero risk” and “groundbreaking” to try to bridge this gap, but opponents demanded verifiable certainty. In public finance, “it might be fine” is not the same as “it’s fine.”

Political cycle. Ammon pointed out that council members were in an election year—during election cycles, public officials are more cautious about decisions that could invite controversy. This is a reminder that advancing crypto policy depends not only on technology and market factors, but also on the pace of political cycles.

From a broader perspective, the narrative of Bitcoin “nationalization” moves slowly at the federal level, and faces heavy resistance at the local level as well. When ETF inflows slow down and regulatory legislation remains pending, institutional-level signals like these deserve more attention than price volatility alone.

Summary

The New Hampshire Executive Council rejected a $100 million Bitcoin-collateralized municipal bond proposal by a 3-to-2 vote, marking a stall in what would have been the final stage of government approval for the world’s first Bitcoin municipal bond plan. Supporters saw an opportunity for innovation and economic development, while opponents were concerned about volatility risk, the political cost of legitimizing an endorsement, and the fundamental requirement for certainty in public finance. This case shows that the barriers for crypto assets entering public finance are not only technical and market-related, but also institutional, trust-related, and political. Even in the most crypto-forward states, the path for Bitcoin to move from private assets into public infrastructure remains long.

Frequently Asked Questions (FAQ)

Q: What is the New Hampshire Bitcoin municipal bond proposal specifically?

A: The proposal was driven by the New Hampshire Banking and Financial Management Authority. It planned to issue $100 million in taxable revenue bonds, using Bitcoin as an overcollateralized asset (collateralization ratio of about 160%). Bond proceeds would be used to fund a trust acquisition of Bitcoin related to the mining company CleanSpark. The bonds used a conduit structure, and the state government bears no repayment responsibility.

Q: Why was it rejected?

A: On July 8, 2026, the New Hampshire Executive Council rejected it in a 3-to-2 vote. Opponents were mainly concerned about Bitcoin’s high volatility, the political risk of public finance endorsing an emerging asset class, and the lack of precedents to reference.

Q: What rating did Moody’s assign to this bond?

A: In March 2026, Moody’s gave it a Ba2 preliminary rating, placing it in the speculative category (junk bonds), two notches below investment grade.

Q: What impact does this have on similar proposals in other states?

A: This rejection case shows that even in states with more crypto-friendly policies, public finance officials remain cautious about using crypto assets as collateral for municipal bonds. Similar proposals in other states may face even stricter scrutiny, especially during politically sensitive periods in the election cycle.

Q: Could the proposal be resubmitted?

A: BFA officials said they remain excited about New Hampshire’s leadership role in the digital asset economy and are willing to resubmit the concept to the Executive Council in the future. However, this version of the proposal failed before it could move from a rated credit structure to an approved municipal bond issuance.