NYC Mayor Proposes Bitcoin-Backed Bonds and Repeal of BitLicense
Overview
At the Bitcoin 2025 conference held May 20 in New York City, Mayor Eric Adams outlined a plan to launch the city’s first Bitcoin-backed municipal bonds—colloquially termed ‘Bitbonds’—and urged the state legislature to repeal the BitLicense framework. Adams described the initiative as a step toward modernizing municipal finance and attracting crypto firms by reducing regulatory burdens.
Key Proposals
- Bitcoin-Backed Bonds: The proposed Bitbond would allocate 90% of proceeds to traditional public spending with 10% dedicated to acquiring BTC via custody solutions.
- Interest Structure: Following a Bitcoin Policy Institute model, investors would earn a fixed 1% coupon over a 10-year term plus a share of Bitcoin market gains at maturity.
- Repeal of BitLicense: Adams criticized the state’s 2015 BitLicense as overly restrictive and costly, calling for its elimination to foster innovation and reduce entry barriers.
Technical Architecture of Bitbonds
The Bitbond framework relies on tokenization of bond instruments on a permissioned blockchain, enabling immutable recordkeeping and programmable cash flows. Each bond issuance would be overseen by the New York City Comptroller’s Office and leverage regulated custodians compliant with the New York Department of Financial Services. Through smart contracts, coupon payments—and Bitcoin allocations—could be automatically executed when predefined conditions are met.
Custody and Smart Contracts
- Custody: Held by NYDFS-licensed trust companies such as Paxos or Coinbase Custody.
- Token Issuance: Registered as a securities offering under federal regulations via Form S-1 or S-3 exemption.
- Contract Triggers: Automated sinks for distribution of 1% annual coupon in USD stablecoins and BTC transfers to investors’ digital wallets at maturity.
Municipal Finance Implications
Introducing crypto-backed bonds could diversify funding sources for infrastructure projects. According to Dr. Jane Liu, a municipal finance expert at Columbia University, ‘Bitbonds present a hybrid asset class that can potentially lower borrowing costs if BTC outperforms traditional benchmarks, but they introduce price volatility risk that must be hedged.’ Risk mitigation strategies include employing options markets or establishing reserve funds denominated in USD.
Regulatory Challenges and Industry Response
Industry stakeholders have voiced mixed reactions. Circle CEO Jeremy Allaire noted, ‘A repeal of the BitLicense could unlock substantial capital flows, but clear federal guidelines are essential to ensure investor protection.’ Meanwhile, the NYDFS has yet to comment formally on the Bitbond proposal. At the federal level, the SEC’s current stance classifies many crypto assets as securities—a classification that may extend to tokenized municipal bonds.
Next Steps and Timeline
Adams plans to introduce draft legislation in the 2026 state session and form a working group with the City Council and financial technology firms by Q3 2025. The administration aims for a pilot issuance of $100 million in Bitbonds by mid-2026, subject to legal review and NYDFS approval.
‘We are charting a new course for municipal finance that aligns with digital innovation and broader economic inclusion,’ Adams said.