Arizona Moves to Establish Strategic Digital Asset Reserves

Arizona is on the brink of a significant decision regarding its approach to digital assets. Two strategic digital asset reserve bills have successfully navigated through the Arizona House Rules Committee and are now poised for a full floor vote. These bills, if passed, would pave the way for Arizona to establish strategic digital asset reserves. These reserves would be composed of existing assets confiscated through criminal proceedings, as well as newly invested public funds.

The political landscape in Arizona favors the passage of these bills. The Republicans hold a 33-27 majority in the House of Representatives, which increases the likelihood of the bills being approved. However, the final hurdle could be the state’s Democratic governor, Katie Hobbs. Governor Hobbs has a history of vetoing bills, having blocked 22% of bills in 2024, the highest rate of any state governor. This could pose a challenge for the bills' passage into law.

The two bills in question are the Strategic Digital Assets Reserve Bill (SB 1373) and the Arizona Strategic Bitcoin Reserve Act (SB 1025). The Strategic Digital Assets Reserve Bill focuses on establishing a reserve made up of digital assets seized through criminal proceedings. This reserve would be managed by the state’s treasurer, who would be limited to investing no more than 10% of the fund’s total value each fiscal year. The treasurer would also have the authority to loan the fund’s assets to increase returns, provided that doing so does not increase financial risks.

The Arizona Strategic Bitcoin Reserve Act specifically deals with Bitcoin. This bill proposes allowing Arizona’s Treasury and state retirement system to invest up to 10% of its available funds into Bitcoin. Additionally, the bill would allow for the state’s Bitcoin reserve to be stored in a secure, segregated account inside a federal Bitcoin reserve, should one be established. This move is part of a broader effort by Arizona to position itself as a leader in the digital asset space, following several laws aimed at promoting the use of digital assets, including a law that allows businesses to pay taxes in Bitcoin.

While Arizona is leading the race to establish a state-based digital asset reserve, several other states are closely following. On March 6, the Texas senate passed the state’s Strategic Bitcoin Reserve Bill by a vote of 25-5. The Texan bill still needs to pass the House and get the governor’s signature to pass into law. Following this vote, a new bill was introduced to cap the size of the previously uncapped reserve. Utah also recently passed Bitcoin legislation, but all references to the establishment of a strategic reserve were removed at the last moment. Meanwhile, the Oklahoma House passed its Bitcoin Reserve Bill, which will now head to the state’s senate.

The full floor vote in Arizona is anticipated to be a closely watched event. The outcome could set a precedent for other states considering similar measures. Supporters of the bills argue that establishing a strategic reserve could provide long-term benefits for the state's economy, including diversification of financial holdings and a potential hedge against inflation. However, opponents may raise concerns about the volatility and regulatory risks associated with digital assets. The vote will be a critical moment in determining Arizona's stance on digital assets and its potential impact on the broader financial landscape.