Key Highlights
- New Hampshire’s Executive Council rejected a $100 million Bitcoin-backed bond proposal in a 3-2 vote.
- The proposed bond would have used $175 million worth of Bitcoin as collateral, with no taxpayer money involved.
- Critics raised concerns about Bitcoin’s volatility, while supporters said the plan could help New Hampshire lead in digital finance.
New Hampshire’s plan to launch the first Bitcoin-backed municipal bond in the United States has come to a stop after the state’s Executive Council voted against the proposal on Wednesday.
According to a local report, the council rejected the plan in a 3-2 vote, ending an effort that supporters said could have made New Hampshire a leader in digital finance. While state officials said the proposal would not put taxpayer money at risk, several council members said they still had concerns about using Bitcoin to support such a financial deal.
The proposal was intended to help a private company raise money without using public funds, but it did not receive the necessary approval to move forward.
How the Bitcoin-Backed bond would have worked
The proposal came from the New Hampshire Business Finance Authority (BFA) with support from Governor Kelly Ayotte. Under the plan, the BFA would have issued $100 million in taxable municipal bonds through a private financing arrangement. Bitcoin mining company CleanSpark would have borrowed the money, while investors who bought the bonds would have been repaid by the company, not by the state.
To protect investors, CleanSpark planned to place $175 million worth of Bitcoin into a trust as collateral for a three-year bond. If the price of Bitcoin dropped too much and the value of the collateral fell below $140 million, the Bitcoin would have been automatically sold to repay bondholders.
Supporters said this structure meant New Hampshire would not lose money even if Bitcoin’s price fell sharply because no public funds or taxpayer dollars were involved.
Council members raise concerns over Bitcoin risks
Not everyone was convinced the proposal was appropriate. Council members questioned whether the deal would provide enough public benefit for New Hampshire. They raised concerns about the state’s role in approving a financial product linked to Bitcoin, which is known to be volatile.
Councilor Karen Liot Hill, the only Democrat on the council, said she was not against Bitcoin or cryptocurrency itself. However, she believed the state needed to be careful before giving its approval to such a new type of financial product.
“We are being asked as a state to lend a kind of legitimacy to a financial transaction which is an emerging asset class that’s been shown to be very volatile,” she said before voting against the proposal. She added that more time was needed to fully understand the possible risks before making a final decision.
Supporters say Bitcoin could bring new opportunities
James Key-Wallace, executive director of the Business Finance Authority, defended the proposal during the meeting. He argued that digital assets have already become part of the financial system and that New Hampshire had a chance to be one of the first states to support this kind of financing.
“Whether you like Bitcoin or not, it’s get on board or get left behind for a lot of financial institutions,” he said. “Some state is going to be at the center of that, and we want New Hampshire to be at the front of the pack.”
Moody’s rating highlights financial concerns
The proposal had previously received a provisional Ba2 rating from Moody’s Investors Service. The rating placed it in the speculative category because Bitcoin prices can rise and fall quickly.
Finance professor David Krause also said the structure appeared to protect taxpayers from direct financial losses, but he warned that Bitcoin’s price swings could still create challenges. He also said using Bitcoin as collateral was very different from how municipal bonds have traditionally been designed, which usually focus on stability and predictable returns.
Proposal could return after further review
Although the proposal was rejected, the discussion may not be over.
After the vote, Key-Wallace said he understood that some council members wanted more time to review the idea. He added that the Business Finance Authority is ready to answer more questions and would be willing to present the proposal again in the future if the council chooses to reconsider it.
Also Read: Labour MPs Seek Permanent UK Ban on Crypto Political Donations
