The New Hampshire Business Finance Authority will take part in a novel financial transaction involving Bitcoin that leaders hope can become a model for future deals.
Under the arrangement, which still needs final approval by the state’s Executive Council, the Business Finance Authority will broker the issuance of a bond valued at $100 million that will have Bitcoin serve as collateral. While the Business Finance Authority is a quasi-governmental entity, there is no taxpayer money involved and no risk to the state should the loan default, according to James Key Wallace, the authority's executive director.
Instead, the deal could benefit both the lender and the borrower.
“This is the first time that a company who's saying, ‘let me borrow money, let me access the capital markets’ is using Bitcoin as collateral,” said Key Wallace.
Under the terms of the deal, CleanSpark, a publicly traded Bitcoin mining company based in Nevada, will use its Bitcoin holdings as collateral to obtain a private loan. The lender, who has not been selected yet, will be protected should the price of Bitcoin — which is notoriously volatile — fall below a certain threshold. If the price of the cryptocurrency rises, the lender, as well as the Business Finance Authority, stand to benefit.
The deal will allow CleanSpark to essentially leverage its Bitcoin holdings, according to Key Wallace, without having to sell.
“When you can now use [Bitcoin] as collateral at scale to access cash, then you can use that to grow your companies, make investments and use it like you can any other asset, your stocks or bonds or cash,” he said.
If the process goes well, Key Wallace said the finance authority may broker similar deals in the future, collecting fees along the way.
While there were no regulatory changes required to structure the transaction, Key Wallace said the state’s favorable trust laws were crucial to the underpinnings of the deal.
New Hampshire Republicans have sought to make the state a crypto-friendly place to do business in recent years, including passage of a law earlier this year that permits the state to purchase small amounts of Bitcoin, as well as precious metals, in addition to more traditional investments such as treasury notes.
Monica Mezzapelle, New Hampshire’s state treasurer, said the state has not yet purchased any cryptocurrencies, however.
“We continue to evaluate our options regarding cryptocurrencies, but we are not ready to move in that direction at this time,” she said.
Since the state law went into effect in early July, the price of Bitcoin has fallen approximately 15%, while the price of gold is up 23%, and silver has soared more than 37%.
