New Hampshire infrastructure authority announces plans to accept bitcoin for municipal projects
The intersection of the cryptocurrency industry and public finance has been a topic of interest for a while, with various attempts made to bridge the two sectors. From Quincy, Massachusetts, utilizing blockchain technology to New York Mayor Eric Adams proposing “BitBonds,” the integration has been met with mixed responses. However, the New Hampshire Business Finance Authority (BFA) believes it has successfully navigated this complex terrain with its plan to issue $100 million in bitcoin-backed bonds early next year.
The team behind the deal sees this venture as just the beginning of a series of opportunities for the cryptocurrency industry within the municipal market. According to James Key-Wallace, the executive director of the BFA, bondholders stand to gain a percentage of the upside if the value of bitcoin appreciates, in addition to their standard coupon payments. On the flip side, if bitcoin’s value declines below a certain threshold, the trust associated with the bonds will liquidate, ensuring bondholder repayment.
The structuring of this innovative transaction involves a bitcoin mining company working with Wave Digital Assets to supply around $150 million worth of bitcoin into a New Hampshire Statutory Trust overseen by BitGo Trust Company. The BFA will then issue $100 million in bonds backed by this trust, with debt service payments sourced from the trust itself. The adaptability of this setup to the volatile nature of bitcoin ensures a safeguarded process for both parties involved.
The fee incurred by the BFA for facilitating the deal will be paid in bitcoin and channeled into a Bitcoin Economic Development Fund for further investments in local business ventures and economic development in New Hampshire. The bonds’ interest will be taxable, adhering to standard regulatory requirements for such financial transactions.
Les Borsai, co-founder of Wave, is optimistic about the deal’s pricing in January and anticipates a five-year maturity period, pending investor interest. The underwriter for the bonds is yet to be unveiled due to compliance protocols, with the involved bitcoin mining company also remain undisclosed at this stage. The forthcoming rating for the bonds, which is currently in process, will pave the way for official approval from the state’s governor and the New Hampshire Executive Council.
Governor Kelly Ayotte expressed her approval of the initiative, hailing it as a ground-breaking step towards nurturing new technologies. This pioneering move is not intended to stop at $100 million in bonds but is envisioned as a catalyst for larger-scale developments in the crypto ecosystem. Key-Wallace believes that this transaction model could be replicated by other bitcoin-holding companies, potentially leading to billions of dollars flowing through similar structures in the future.
The advantages of this approach extend to cryptocurrency companies seeking more cost-effective financing options than traditional loans and the ability to convert their idle reserves into actively leveraged assets. The prospect of expanding the reach of such transactions and enabling greater access to capital for digital asset holders underscores the transformative potential of this venture in reshaping the landscape of public finance.
