In recent weeks, the momentum for state governments to establish digital assets reserves has faced significant setbacks, with legislative efforts in Montana, North Dakota, South Dakota, and Wyoming failing to pass crypto reserve bills.
According to Bloomberg, the ongoing volatility associated with cryptocurrencies, particularly Bitcoin (BTC), has raised concerns among lawmakers, leading to a cautious approach toward integrating digital assets into state financial strategies.
Montana And South Dakota Fail To Pass Crypto Reserve Bills
Jennifer Schulp, director of financial regulation studies at the Cato Institute, commented on the prevailing perception of cryptocurrency volatility, stating:
There’s a well-deserved perception of volatility in terms of Bitcoin and all digital assets. I think that’s going to continue to be an issue even as the digital assets environment continues to be a positive one.
This sentiment echoes the hesitancy seen in recent votes, where lawmakers opted against proposals to allocate state funds into Bitcoin reserves, traditionally reserved for low-risk assets like short-term bonds.
Montana’s proposal to create a state-level crypto reserve was defeated with a 41-59 vote in the House last week, while South Dakota’s similar initiative was postponed after a recent House vote. Despite the setbacks, strategic crypto reserve bills have been introduced in 24 states, indicating a persistent interest.
Notably, the concept of a national strategic Bitcoin reserve gained traction following discussions initiated by former President Donald Trump and Senator Cynthia Lummis at a conference in Nashville.
Trump’s executive order in January called for a feasibility study on a crypto stockpile, though it stopped short of designating Bitcoin as the centerpiece of a national reserve.
Lummis has proposed that the US government acquire 1 million Bitcoin, while Trump’s plan suggested maintaining ownership of approximately 200,000 Bitcoin already held by the government due to asset seizures.
However, even in Lummis’ home state of Wyoming, her proposal to invest state funds in Bitcoin failed in early February, receiving only one favorable vote in the House.
Ohio Remains Hopeful
Per the report, Ohio remains optimistic about its proposals to create a crypto reserve in the House and a Bitcoin reserve in the Senate, despite the volatility concerns elsewhere.
Andrew Burchill, executive director of the Ohio Blockchain Council, argued that while all investments carry risk, Bitcoin has outperformed traditional assets over the past decade, suggesting a long-term view that might mitigate concerns about volatility.
In Oklahoma, a strategic Bitcoin reserve act recently passed the Government Oversight Committee, signaling some legislative support for digital asset investment. However, the overall willingness of states to prioritize public funds for crypto investments remains uncertain.
Schulp emphasized the complexity of crafting effective policies for cryptocurrency investments, stating, “I think this does raise a lot of questions in terms of whether or not the policy is a good one and what the implementation of that policy would even look like.”
She noted that the diverse regulatory frameworks governing state budgeting and investment further complicate the landscape for potential crypto reserves.
Featured image from DALL-E, chart from TradingView.com
