North Carolina House Passes Bill Allowing 5% State Funds in Digital Assets

The North Carolina House of Representatives has passed a landmark bill that allows the state to invest in digital assets, marking a significant step in the adoption of cryptocurrency by state governments. The legislation, known as the “Digital Assets Investment Act” (HB92), empowers the state treasurer to allocate up to 5% of investment funds into approved digital assets, pending stringent custody and compliance checks. This move is part of a broader trend among states to integrate cryptocurrency into their financial strategies.

The bill outlines a regulated approach to crypto exposure, specifying that investments will be made through funds rather than direct purchases. This method aims to mitigate risks associated with the volatile nature of digital assets. The North Carolina Investment Authority, which oversees the state's financial portfolio, will be responsible for managing these investments. The authority's portfolio, valued at $127 billion, will now have the flexibility to include digital assets, providing a new avenue for potential growth and diversification.

Republican House Speaker Destin Hall originally introduced the bill in February, and it now advances to the Senate for further deliberation. Additionally, lawmakers passed a companion bill, the State Investment Modernization Act (HB506), with overwhelming support, signaling broader legislative momentum toward crypto adoption at the state level. The bill requires board approval for any foray into digital assets and mandates independent third-party evaluations to ensure proper custody and compliance standards.

Supporters of the bill, such as Rep. Keith Kidwell, argue that this approach enhances portfolio diversification while maintaining prudent risk management. He stated, “In the same way that a good investment broker would do for you, we need to spread the allocation around.” However, critics like Rep. Maria Cervania raised concerns about the volatility of assets like Bitcoin, expressing hesitation about the state deepening its commitment to such unpredictable markets. She stated, “I still have a lot of questions about this investment strategy and the level of commitment we’re making to it.”

Despite some resistance from within the State Employees Association of North Carolina, Governor Josh Stein has thrown his weight behind House Bill 92. He emphasized the potential benefits of expanding the treasurer’s authority over state investments. With prominent voices forecasting a surge in Bitcoin’s value, the state’s move appears timed to capitalize on future gains. North Carolina now trails only Arizona in the legislative race to enable crypto investments at the state level. While Arizona has already passed dual crypto bills through both chambers, final approval awaits the governor.

This growing momentum at the state level contrasts with skepticism at the federal front. The passage of this bill reflects a growing interest among state governments in leveraging the potential benefits of cryptocurrency. By allowing for a limited but strategic investment in digital assets, North Carolina is positioning itself at the forefront of this financial innovation. The regulated approach ensures that the state can explore the opportunities presented by cryptocurrency while maintaining a cautious and controlled investment strategy.

The bill's progression to the Senate marks the next phase in its journey towards becoming law. If approved by the Senate, it will set a precedent for other states considering similar measures. The legislation not only highlights North Carolina's forward-thinking approach to financial management but also underscores the increasing acceptance of cryptocurrency as a viable investment option. As the state moves forward with this initiative, it will be closely watched by other regions and financial experts, who will be keen to observe the outcomes and potential implications of this landmark decision.