Arizona Governor Vetoes Bill to Invest State Funds in Bitcoin

Arizona Governor Katie Hobbs has vetoed a bill that would have allowed the state to invest in Bitcoin using seized funds. The legislation, known as Senate Bill 1025, proposed using seized funds to invest in Bitcoin and create a digital assets reserve managed by the state. The bill passed the state House in a narrow 31–25 vote, but was swiftly struck down by Governor Hobbs.

Governor Hobbs cited concerns over the volatility and lack of regulation surrounding cryptocurrencies, labeling them as "untested investments." She argued that the state's retirement system, one of the strongest in the country, should not be exposed to such risks. "The Arizona State Retirement System is one of the strongest in the nation because it makes sound and informed investments. Arizonans' retirement funds are not the place for the state to try untested investments like virtual currency," Hobbs wrote in a statement.

The veto ends a push that could have made Arizona the first state to set up a cryptocurrency reserve, and it could have even outpaced the U.S. Treasury Department in doing so. The bill proposed adding virtual currency to the portfolio of the Arizona State Retirement System. Supporters of the bill argued that including Bitcoin and other digital assets could future-proof public funds and provide a hedge against inflation. However, opponents, including Governor Hobbs, expressed concerns about the lack of proper risk models and oversight for such investments.

Governor Hobbs' decision to veto the bill has sparked criticism from crypto advocates, who see it as a setback for the adoption of digital assets in public pension programs. The veto also highlights the cautious approach adopted by several state governments in managing public funds, prioritizing stability and tested investments over potential high-risk, high-reward opportunities. The bill would have made Arizona a pioneer in public adoption of crypto assets, but that path now seems uncertain. Crypto assets will stay out of state-backed retirement portfolios unless lawmakers revise the proposal or rally enough votes to override the veto.

Another bill, SB1373, which would allow the state to reserve up to 10% of Arizona’s rainy-day funds in digital assets like Bitcoin, is yet to reach a final vote. Several other states have also been pursuing similar efforts, but to no avail as yet. The veto comes just days after Arizona lawmakers passed two bills that would have allowed the state to invest up to 10 percent of public funds in Bitcoin. The bills, SB1025 and SB1373, passed both chambers and placed Arizona ahead of other states weighing similar moves. However, Governor Hobbs' decision now closes the door on what could have been the first state-level Bitcoin reserve in the country.