Michigan's Strategic Crypto Move: Diversifying Reserves Amid National Trend

Michigan’s House Bill 4087, which would permit the state to allocate up to 10% of its budget reserves into cryptocurrency, has advanced to a second reading in the state House of Representatives after seven months of inactivity. Introduced in February 2025 by Republican representatives Bryan Posthumus and Ron Robinson, the legislation aims to establish a framework for a strategic crypto reserve, allowing the state treasurer to invest funds from the “countercyclical budget” and “economic stabilization fund” into digital assets. The bill, now referred to the Committee on Government Operations, defines eligible cryptocurrencies as digital currencies using encryption techniques to regulate units and verify transactions, operating independently of a central bank.

The legislation includes stringent security requirements to mitigate risks. Assets must be held through approved methods such as secure custody solutions, qualified custodians, or exchange-traded products from registered investment companies. The state must maintain exclusive control over private keys, employ end-to-end encryption, and enforce multi-party transaction authorizations. Data storage will be geographically diversified, and regular audits will be mandatory. Additionally, the bill permits loaning crypto holdings to generate returns, provided it does not increase financial risk.

Supporters argue that the move aligns with broader trends in U.S. states seeking to diversify public finances. They highlight the potential for hedging against inflation and fiat currency devaluation, as well as leveraging crypto’s growing institutional adoption. Michigan would join Texas, New Hampshire, and Arizona—states that have enacted similar laws—though only Texas has allocated state funds to date. Critics, however, raise concerns about the volatility of cryptocurrencies beyond Bitcoin and the lack of criteria to exclude weaker or less established assets. The Michigan Bitcoin Trade Council has opposed the bill, citing risks from unregulated crypto exposure.

The bill’s progress reflects a national shift in crypto policy. The U.S. House recently directed the Treasury Department to study the feasibility of a strategic Bitcoin reserve, focusing on custody, cybersecurity, and accounting standards. If enacted, Michigan’s approach could serve as a model for other states, potentially influencing regulatory frameworks and market dynamics. The state’s detailed security provisions may also set a benchmark for balancing innovation with risk management.

Globally, sovereign adoption of Bitcoin has become a defining trend in 2025, with U.S. states and countries exploring digital assets as part of public finance strategies. The BTC price has surged 25% this year, reaching a record high near $124,500 in August. However, the institutional embrace of crypto has not quelled skepticism. Security vulnerabilities, regulatory uncertainty, and the lack of standardized safeguards remain contentious issues.

Michigan’s bill also underscores the competitive landscape among states. With 26 states currently considering strategic crypto reserve legislation, the bill’s outcome could pressure neighboring states like Illinois, Ohio, and Pennsylvania to accelerate their efforts. The legislation’s success may hinge on public trust, transparent reporting mechanisms, and the ability to navigate federal oversight complexities.

[1] Michigan's Stalled Bitcoin Reserve Bill Advances After 7 Months (https://www.coindesk.com/policy/2025/09/19/michigan-s-stalled-bitcoin-reserve-bill-advances-after-7-months)

[2] Michigan Pushes Ahead with Strategic Crypto Reserve Bill (https://www.coininsider.com/news/2025/09/michigan-pushes-ahead-with-strategic-crypto-reserve-bill/)

[3] Michigan Bitcoin Reserve Bill Moves Forward After Months of Delay (https://decrypt.co/340335/michigan-bitcoin-reserve-bill-moves-forward-after-months-of-delay)

[4] Crypto News: Michigan Wants Bitcoin in Its Piggy Bank - Coinpedia (https://coinpedia.org/news/crypto-news-michigan-wants-bitcoin-in-its-piggy-bank/)

[5] Michigan Crypto Reserve Bill Advances To Second Reading (https://cointelegraph.com/news/michigan-crypto-reserve-bill-moves-to-second-reading)