Moody’s Investors Service has assigned a provisional rating to New Hampshire’s Bitcoin-backed U.S. municipal bond.

Per a Tuesday statement, the agency has given the bond a Ba2 rating, which falls within the “speculative grade” category and reflects substantial credit risk.

However, it must be noted that the rating is provisional, which typically means Moody’s has reviewed the necessary documents to arrive at its assessment, but is still awaiting final legal documentation before issuing a final judgment.

Rating assessments like these offer institutions a way to assess credit risk and guide decision-making, with some investors restricted to investment-grade assets. For the proposed bond, this marks a key step toward potential institutional participation.

As for the next step, the product would need to be priced before entering the market.

A first-of-its-kind

The Bitcoin-backed bond was approved by New Hampshire’s business financing agency, the New Hampshire Business Finance Authority, in November last year to establish what it described as a first-of-its-kind $100 million Bitcoin-backed conduit bond.

Typically, municipal bonds are backed by government credit or project revenue streams, but in this case, the structure relies on over-collateralized Bitcoin.

Per the proposed structure, borrowers would post around 160% of the bond’s value in Bitcoin, with BitGo set to serve as the third-party custodian, alongside a state entity overseeing the bond without taking on repayment risk.

Fees from the program are expected to support the Bitcoin Economic Development Fund, allowing the state to reinvest in business growth and financial innovation.

The bond does not have an official launch date, but its rating has been influenced by Bitcoin’s recent volatility, according to Moody’s.

The Ba2 rating places the bond just below investment-grade status and means it is considered a speculative investment.