Connecticut Bans State Cryptocurrency Reserve

Connecticut has officially enacted a law that restricts the state government from engaging in any activities involving virtual currency, effectively banning the creation of a cryptocurrency reserve. The legislation, known as House Bill 7082, was signed into law by Governor Ned Lamont on June 30, following unanimous approval by both chambers of the state legislature. The law, now enacted as Public Act 25-66, is set to take effect on October 1, 2025.

The bill, introduced in February by Representative Jason Doucette, progressed swiftly through the legislative process, passing both the House and Senate without a single opposing vote. This unanimous support indicates a strong bipartisan consensus on limiting state involvement with digital assets such as Bitcoin. The new law prohibits Connecticut and its political subdivisions from accepting virtual currencies for payments or from purchasing, holding, or establishing any form of digital asset reserve. The statute adopts a broad definition of “virtual currency” under section 36a-596 of the state’s general statutes, which encompasses most cryptocurrencies currently in circulation.

In addition to prohibiting state involvement in virtual currencies, the law implements extensive regulatory updates to the state’s money transmission framework. It mandates that crypto businesses operating under the state’s jurisdiction maintain a 1:1 reserve backing for all customer-held digital assets. The legislation also introduces mandatory risk disclosures, fraud protection measures, and strict transaction limits for virtual currency kiosks, commonly known as crypto ATMs. These measures aim to enhance consumer protection and ensure the stability of digital financial services within the state.

The enactment of this law effectively removes Connecticut from ongoing state-level efforts to integrate Bitcoin into public treasury strategies. While some states have moved to adopt strategic reserves as part of broader digital asset initiatives, Connecticut’s blanket prohibition makes it one of the most restrictive jurisdictions in the country regarding cryptocurrency adoption by state institutions. This decision underscores the state's cautious approach towards the integration of cryptocurrencies into public finance, highlighting the need for clear guidelines and oversight in the rapidly evolving landscape of digital financial services.

By contrast, at least 17 U.S. states are currently reviewing legislation focused on creating state-managed Bitcoin or digital asset reserves. Among them, New Hampshire and Arizona have fully enacted such frameworks, while Texas has cleared similar legislation through both chambers. However, not all efforts have succeeded. On July 1, Arizona Governor Katie Hobbs vetoed House Bill 2324, which sought to establish a Bitcoin reserve fund using cryptocurrencies seized by the government. Hobbs argued that the proposal could discourage local law enforcement from engaging in digital asset investigations by redirecting forfeited assets away from local agencies.

The passage of this legislation in Connecticut reflects a broader trend of regulatory caution towards digital currencies. By prohibiting the state from holding or investing in Bitcoin, Connecticut aims to mitigate potential risks associated with the volatility and regulatory uncertainties of cryptocurrencies. This decision underscores the need for clear guidelines and oversight in the rapidly evolving landscape of digital financial services. The law's passage sets a precedent for other states considering similar regulations, highlighting the growing scrutiny and caution surrounding the integration of cryptocurrencies into public finance.