Original Title: "Bitcoin Enters the Public Debt Market, Moody's Issues the World's First Cryptocurrency-Collateralized Bond Rating"
Original Author: Sanqing, Foresight News
On March 31, Moody's Ratings issued a provisional credit rating of Ba2 for a bond issued by the New Hampshire BFA that is collateralized by Bitcoin. This is the first time in history that a traditional rating agency has evaluated a Bitcoin-collateralized municipal bond.
Image Source: MOODY'S Ratings & Regulatory
What is This Bond
This is a $100 million Bitcoin-backed taxable revenue bond linked to the Waverose Finance Project, divided 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 the investment manager, Orrick providing legal services, and fees obtained by the BFA from the transaction will be used to create a "Bitcoin Economic Development Fund."
The core of the bond's structure is that it does not rely on the cash flows of any entity, but rather repays directly with Bitcoin as collateral. The Bitcoin collateral is custodied by BitGo Trust Company, Inc. and placed in regulated cold storage.
When the borrower needs to pay interest or repay principal, the collateral will be liquidated to cover expenses. The bond also has a relatively favorable term for holders. Holders of Series A-2 are entitled to an additional BTC profit-sharing distribution if the Bitcoin price at maturity is higher than the pricing date after the full interest and principal repayment.
Compared to Bitcoin lending tools on platforms like Coinbase, the greatest significance of this bond is that it provides an opportunity for cryptocurrency to enter the public debt market for financing for the first time. Borrowers no longer rely on private loans from centralized platforms, but instead can leverage institutional funds on a large scale and at a low cost through publicly rated bonds with traditional credit ratings under a compliant framework.
How Institutions Evaluate the Risks of Bitcoin
Moody's stated in the report that the provisional rating primarily reflects risks associated with the collateral, structure, and operations, with Bitcoin's high volatility being the primary consideration.
To hedge against price volatility, the issuance structure introduces a 1.6 times over-collateralization requirement, meaning the value of the BTC collateral must always be maintained above 160% of the debt exposure.
If the collateral ratio drops to the 1.4 times trigger line (meaning the LTV deteriorates to about 71%), a mandatory full redemption mechanism will be triggered, leading to an early maturity of the bond, and the Bitcoin will be liquidated for repayment.
In other words, if you borrow $100, you must at least collateralize $160 worth of Bitcoin; if the collateral value shrinks to below $140, the system will trigger mandatory repayment, and the bond will mature early, resulting in the sale of Bitcoin for repayment.
For conservative assessment in the ratings report, Moody's adopted a 72% advance rate and a shorter liquidation window, simulating an extreme scenario where Bitcoin prices fall about 28% from the pricing date. The tests showed that the 1.6 times initial over-collateralization and the 1.4 times trigger mechanism still provide adequate protection, supporting the Ba2 rating result.
This parameter design is quite conservative, but for an asset that historically has experienced drawdowns of more than 50%, this conservatism may be the precondition for Moody's willingness to issue a rating.
Another noteworthy detail is that although this bond is issued under the name of the New Hampshire BFA, it has no connection to the state's public credit. Moody's explicitly stated in the report that no public funds from the state can be used to pay this bond.
The issuer acts as a "conduit issuer" in the structure. It provides the issuance channel and nominal endorsement but does not bear any credit backing responsibility.
This structure is not uncommon in the traditional municipal bond sector, often used for financing special projects like healthcare and education.
Why This Transaction is Important
To understand the historical significance of this bond, it needs to be viewed in a larger context.
In recent years, the attitude of institutions towards Bitcoin has gone through three stages: from being locked out, to being held as an asset (BTC reserves on corporate balance sheets), and then to being used as collateral for financing (pledging BTC in exchange for fiat loans). This bond represents the beginning of the fourth stage: Bitcoin, as publicly rated debt instruments' underlying collateral, has entered the track of traditional public financial markets.
This track means three things: it opens a window for institutional investors to indirectly hold Bitcoin exposure through compliant channels; prompts Moody's to begin establishing a rating methodology for cryptocurrency collateral, attracting more rating agencies to follow suit; and proves that Bitcoin can, under certain conditions, serve as an underlying logic for "interest-bearing assets," rather than merely being a zero-interest hold.
This bond is not an isolated event. During the same period, the U.S. Department of Labor, under President Trump's executive order, proposed to expand the available scope of digital assets in retirement investment portfolios; several states are considering legislation for "Bitcoin strategic reserves"; New Hampshire is also the first state in the U.S. to pass a cryptocurrency reserve law.
A Ba2 rating may straightforwardly appear as "junk bond" level, but this label can be misleading. In Moody's rating hierarchy, Ba2 is in the second tier of speculative grade, still quite a distance from the bottom of the rating (C/D).
Tesla only obtained investment-grade ratings from S&P and Moody's between 2022 and 2023; Ford still maintains a speculative grade (Ba1) in Moody's system, and barely holds onto the lowest tier of investment grade with a negative outlook in S&P's system. This does not prevent them from being important allocation targets for institutional investors.
Secondly, the fact that this bond can achieve Ba2 rather than a lower rating inherently indicates that the 1.6 times over-collateralization combined with the mandatory liquidation mechanism passed Moody’s stress testing in related scenario simulations. Thus, Ba2 reflects the conservativeness of the structural design rather than a simple negation of the Bitcoin asset itself.
Looking at historical precedents, the first mortgage-backed securities (MBS) and the first green bonds also experienced a similar starting point upon entering the rating system; as pricing experiences accumulate and structural norms mature, ratings often improve accordingly. In this sense, Ba2 is merely a starting point.
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