State-Level Efforts to Embrace Cryptocurrency Face Challenges
This year has witnessed a remarkable surge in interest from U.S. states eager to invest public funds in cryptocurrencies, driven by a desire to establish digital asset reserves ahead of any federal initiative. However, the journey has been fraught with mixed results, as five states—Pennsylvania, Wyoming, Montana, South Dakota, and North Dakota—have seen their legislative efforts falter. In contrast, Utah stands on the brink of success, just one vote shy of final approval, while Texas has reportedly advanced a bill through its state Senate.
The backdrop to these state-level initiatives includes discussions in Congress, where the notion of a federal strategic digital assets reserve has gained traction. This conversation was notably amplified during the Bitcoin 2024 event in Nashville, Tennessee, prior to Donald Trump’s electoral victory and the subsequent Republican surge in Congress. Trump has publicly supported the idea, while figures like Michael Saylor of MicroStrategy and Senator Cynthia Lummis of Wyoming, who chairs the crypto subcommittee of the Senate Banking Committee, have been vocal advocates for its implementation.
Many states have rushed to establish their own frameworks, aiming to outpace federal legislation. However, the enthusiasm surrounding these initiatives has been tempered by a significant decline in the value of Bitcoin (BTC), the primary digital asset in focus. Following a post-election surge, Bitcoin has dropped in value from a high of $106,000 on inauguration day to approximately $86,000, leading to concerns about the viability of state investments. Compounding these challenges was a high-profile hack of the Bybit exchange, which reportedly resulted in the theft of an unprecedented amount of cryptocurrency, further dampening enthusiasm among state officials.
“That sense of urgency appears to have abated now,” remarked Johnny Garcia, Managing Director at VeChain Foundation, who has closely monitored these developments. “My view is that states now have some breathing room to reflect and strategize about the future.”
The legislative attempts in Montana and North Dakota were met with clear opposition, as both states rejected proposals to establish state-level crypto reserves. The other three states experienced similar outcomes, with initiatives failing to advance past committee stages. Meanwhile, Utah has made significant strides with its proposed legislation, which seeks to permit investments of up to 5% of certain public accounts in cryptocurrencies. This bill has successfully navigated both the state house and a senate committee, positioning it for a full senate vote. However, as with many legislative efforts, the outcome remains uncertain given the limited time frames typically afforded to state legislative processes.
“While Utah appears to be the frontrunner in finalizing its bill, nothing is guaranteed,” cautioned Dennis Porter, CEO of the Satoshi Action Fund, which advocates for state adoption of Bitcoin reserves. “It’s a dynamic process.”
Porter emphasized that states are acting as a “laboratory of democracy,” where various approaches to cryptocurrency can be tested. He shared on social media platform X (formerly Twitter) that the failure of many bills is a “normal” part of the legislative process, which his organization intends to pursue year after year.
Texas, recognized as a significant hub for Bitcoin mining, has reportedly moved its crypto reserve bill out of committee, joining the ranks of states exploring diverse digital asset initiatives. However, the variety of approaches across states makes it challenging to define a unified effort. Some states are also exploring other aspects of cryptocurrency involvement; for instance, Indiana’s House has passed a bill promoting the use of blockchain technology for enhancing government efficiency, while Arizona is advancing legislation to manage unclaimed property in cryptocurrency form instead of converting it to cash, requiring oversight through a state fund.
Despite North Dakota’s failed attempt to establish a reserve, the state house has approved a separate resolution encouraging its treasurer to invest specific state funds in digital assets. This resolution is now awaiting consideration by the state senate. Looking ahead, Garcia predicts that “many of these states will likely authorize digital assets as part of their state pension and investment options before progressing toward more aggressive digital asset reserves.”
