Arizona Governor Vetoes Two Crypto Bills Citing Market Volatility

Arizona Governor Katie Hobbs has vetoed two significant crypto-related bills, Senate Bill 1373 and Senate Bill 1024, effectively halting the state's efforts to integrate digital assets into its public financial system.

Senate Bill 1373, sponsored by Senator Mark Finchem, proposed the establishment of a Digital Assets Strategic Reserve Fund. This fund would be managed by the State Treasurer and would consist of appropriated funds and seized digital assets. The Treasurer would have the authority to deposit these assets in secure custody solutions or exchange-traded products. The bill also permitted the Treasurer to invest up to 10% of the fund annually and loan digital assets to generate returns, provided that the financial risks to the state remained minimal. However, Governor Hobbs rejected the bill, citing that a similar measure had already been enacted into law. Last week, it was reported that Hobbs signed HB 2749, which allows the state to take ownership of abandoned digital assets if the owner fails to respond to communications within three years.

Governor Hobbs' rationale for vetoing SB 1373 was that the current volatility in cryptocurrency markets makes it an imprudent fit for general fund dollars. She emphasized that she had already signed legislation this session that allows the state to utilize cryptocurrency without placing general fund dollars at risk, which she deemed the responsible path to take. This reasoning aligns with her earlier veto of SB 1025 on May 2, which proposed creating an Arizona Strategic Bitcoin Reserve.

Senate Bill 1024, sponsored by Senator Wendy Rogers and Representative Jeff Weninger, aimed to allow state agencies to accept cryptocurrency for payments, including fines, taxes, and fees. The bill would have permitted agencies to enter into agreements with cryptocurrency service providers, establish transaction terms, and clarify payment liability. However, Governor Hobbs vetoed this bill as well, stating that while it would allow state agencies to enter into agreements to protect the state from risks associated with cryptocurrency, legislators on both sides of the aisle acknowledged that it still left the door open for too much risk.

Despite vetoing these two bills, Governor Hobbs signed House Bill 2387, which introduces regulations for cryptocurrency kiosk operators. This bill aims to enhance consumer protection and curb fraud by mandating clear disclosures in multiple languages, obtaining acknowledgment, and issuing detailed receipts after each transaction. It also requires the use of blockchain analytics to help prevent fraud and for operators to maintain a written anti-fraud policy. Additionally, the bill ensures that live customer service is available 24/7.

The bill sets transaction limits of $2,000 per day for new customers and raises the limit for existing customers from $5,000 to $10,500. Furthermore, operators are required to offer full refunds for fraudulently induced transactions if reported within 30 days, subject to law enforcement verification.

Governor Hobbs' actions reflect a cautious approach to integrating cryptocurrency into the state's financial system. While she has vetoed bills that would have allowed for broader use of digital assets, she has also signed legislation that aims to protect consumers and prevent fraud. This balanced approach underscores the need for careful consideration and regulation in the rapidly evolving world of cryptocurrency.