The cryptocurrency craze has officially reached the halls of state governments, as a growing number of U.S. states are considering bills to invest taxpayer money into digital assets like bitcoin. In a trend that seemed to emerge overnight, lawmakers from Utah to Maryland are suddenly racing to craft legislation allowing public funds to be used for crypto investments.
Leading the pack is Utah, which just passed a groundbreaking bill in its House of Representatives to permit the state treasurer to invest public funds into digital assets. The legislation, which survived a nail-biter vote, would allow investments into cryptocurrencies with a market cap exceeding $500 billion – currently only bitcoin meets that criteria. The bill now heads to the state senate, inching closer to opening the door for a state-sanctioned crypto buying binge.
States Jump on the Bitcoin Bandwagon
Utah isn’t alone in the rush to embrace crypto at the state level. Kentucky and Maryland both introduced their own measures this week seeking to tap into the perceived digital gold rush:
- Kentucky put forward twin bills to allow state pension funds to invest in cryptocurrency ETFs, while also throwing up roadblocks against central bank digital currencies (CBDCs).
- Maryland saw a Democratic delegate introduce legislation to establish a state “Bitcoin Strategic Reserve” funded by gambling violation revenues, mirroring a federal plan pushed by Senator Cynthia Lummis.
They join a pack of over a dozen states weighing different crypto investment bills during their current legislative sessions. Two states, Michigan and Wisconsin, have already taken the plunge, allocating portions of state retirement funds to digital asset ETFs.
Crypto Enthusiasm Trickles Up
This sudden flurry of state activity seems to take a page from the pro-crypto stance of President Donald Trump. His administration has directed government working groups to explore the feasibility of a federal strategic stockpile of digital assets, though stopping short of explicitly pushing for a “Bitcoin Strategic Reserve.”
“In today’s digital age, we must prioritize building secure strategic reserves beyond oil – including Bitcoin – to ensure America’s continued global leadership into the future.”
– Sen. Cynthia Lummis (R-WY)
Lummis’ bold proposal has energized crypto advocates across the country and found eager allies in statehouses coast-to-coast. By racing to pass crypto-friendly legislation, states appear to be positioning themselves for a new digital economy powered by blockchain assets.
Concerns Over Crypto Speculation
Not everyone is convinced that gambling public funds on volatile cryptocurrencies is a wise move for states. Investment boards overseeing state pension funds have a fiduciary duty to make prudent decisions to protect retiree benefits. Crypto’s wild price swings and uncertain long-term value proposition have many experts urging caution. States are looking for a Hail Mary to shore up massively underfunded pensions, but bitcoin is a very risky bet to make with taxpayer money,
warned one analyst.
There are also logistical and security challenges for governments diving into owning bitcoin and other digital assets directly, compared to indirect exposure via ETFs or other funds. Custody solutions, private key management, and other technical complexities could hamper state treasurers more familiar with traditional reserve assets.
The State Crypto Race Heats Up
Despite the risks, the fear of missing out on the next big technological shift – and the potential economic windfalls – is a powerful motivator for states. Whoever plants their flag first could gain an early advantage in attracting crypto businesses, jobs, and tax revenues.
This “state crypto arms race” is likely to accelerate as the bitcoin reserve movement gains steam federally and more statehouses look to make a splash. While Utah is currently leading the pack with its crypto investment bill on the 1-yard line, the competition is heating up fast:
- Texas, Florida, and Wyoming are actively exploring policies to make their states more crypto-friendly.
- Colorado now lets residents pay state taxes in crypto.
- Multiple states are studying blockchain technology for government functions like recordkeeping and secure voting.
The state-by-state battle to invest public money into crypto assets is just one front in a larger war to prepare for a blockchain-based future. How it all shakes out is anyone’s guess, but one thing is certain: the crypto rainbow is coming to a statehouse near you.
