Michigan's Crypto Bill Splits Experts: Diversified Holdings vs. Bitcoin-Only Security

Michigan’s House Bill 4087, which seeks to authorize the state to allocate up to 10% of its general and stabilization funds into cryptocurrency investments, has advanced to the second reading in the state House of Representatives after a seven-month pause. Introduced in February 2025 by Republican representatives Bryan Posthumus and Ron Robinson, the bill now awaits review by the Committee on Government Operations ^[1]. If enacted, Michigan would join Texas, New Hampshire, and Arizona—three states that have already established legal frameworks for state-level Bitcoin reserves ^[2]. Texas, for instance, has allocated $10 million to purchase Bitcoin, while the other two states have yet to fund their reserves ^[1].

The legislation outlines stringent security protocols for crypto holdings, requiring the state to maintain exclusive control over private keys, employ encryption, and mandate multi-party authorization for transactions. Assets must be held through secure custody solutions, qualified custodians, or exchange-traded products (ETPs) from registered investment companies. Additionally, the bill permits the state to lend out crypto holdings without increasing financial risk, a provision aimed at generating returns while mitigating exposure ^[3]. Critics, however, argue that the bill’s broad definition of eligible digital assets—unrestricted to Bitcoin—introduces unnecessary risks. The Michigan Bitcoin Trade Council has opposed the measure, advocating for a Bitcoin-only reserve to avoid centralization risks associated with other cryptocurrencies ^[3].

The bill’s progress aligns with a broader trend of state-level adoption of crypto reserves. Over 26 U.S. states currently have active crypto reserve legislation, and 47 have proposed or considered such measures, partly driven by President Donald Trump’s March 2025 executive order to establish a national Bitcoin reserve ^[2]. Proponents view the initiative as a hedge against inflation and a diversification strategy for public funds, while skeptics highlight Bitcoin’s price volatility—despite its 25% year-to-date gain, which pushed its price to a record $124,500 in August 2025 ^[1].

Supporters of the bill, including industry experts like Kadan Stadelmann of Komodo Platform, argue that Michigan’s security provisions address past failures in states like Florida. Stadelmann emphasized that the bill’s measures, such as disaster recovery protocols and regular audits, could set a precedent for other states to follow, potentially pressuring neighboring regions like Illinois and Ohio to accelerate their efforts ^[5]. The U.S. House has also directed the Treasury Department to study the feasibility of a strategic Bitcoin reserve, focusing on custody, cybersecurity, and accounting standards ^[1].

Opposition remains vocal, particularly from groups concerned about regulatory uncertainty and the lack of specific safeguards against weaker cryptocurrencies. The Michigan Bitcoin Trade Council criticized the absence of a market-capitalization floor or other criteria to limit which assets the state might purchase ^[4]. Meanwhile, federal regulators and lawmakers continue to debate the role of crypto in public finance, with the U.S. House advancing an appropriations bill to explore the governance of a national Bitcoin reserve ^[3].

If passed, the bill could serve as a model for other states, but its implementation will face scrutiny over financial risks and regulatory compliance. The state’s choice of custodians, audit mechanisms, and risk limits will be critical in determining its success. As the debate unfolds, Michigan’s move reflects a growing institutional embrace of Bitcoin, with 17 other states still pending decisions on their crypto reserve proposals ^[3].