Arizona House Passes Bill for State Managed Bitcoin Reserve

The Arizona House of Representatives has passed House Bill 2324 (HB 2324), a significant piece of legislation aimed at creating a state-managed reserve for Bitcoin and other digital assets seized through criminal forfeiture. This bill, which cleared the Arizona Senate last Thursday, is now awaiting Governor Katie Hobbs' consideration. If signed into law, HB 2324 would authorize the inclusion of digital assets under the state’s asset forfeiture laws and establish modern custody protocols. These protocols include blockchain-based access controls, the use of third-party custodians, and various options for asset management such as digital wallet storage, liquidation through licensed crypto exchanges, or retention based on market conditions.

The bill directs the first $300,000 from seized crypto to the Attorney General, with the remaining funds split between the state and the reserve. This initiative marks Arizona’s second state-level effort to establish a crypto-based reserve, following Governor Hobbs’ earlier approval of legislation that created a Bitcoin fund backed by unclaimed property. The passage of HB 2324 underscores Arizona’s proactive approach to integrating digital assets into its financial framework, positioning the state as a leader in the adoption of cryptocurrency within government operations. The bill’s provisions for modern custody protocols and asset management options reflect a strategic effort to ensure the secure and efficient handling of seized digital assets, aligning with the state’s broader goals of innovation and financial transparency.

HB 2324 establishes rules for the seizure, storage, and sale of digital assets obtained in criminal investigations. It amends Arizona’s forfeiture laws to explicitly cover digital assets, including Bitcoin, stablecoins, and other virtual currencies. The bill also outlines protocols for the management of these assets, ensuring that they are handled securely and efficiently. The first $300,000 from any forfeited digital asset would be directed to the Attorney General’s office, with additional proceeds split between state coffers and the reserve fund. This approach ensures that law enforcement agencies are adequately funded while also building a reserve of digital assets for the state.

Governor Hobbs has shown support for stricter oversight of the cryptocurrency industry but has been cautious about exposing state funds to the volatility of cryptocurrency markets. In May, she vetoed Senate Bill 1025, which would have allowed up to 10% of state treasury and pension funds to be invested in Bitcoin, citing market instability. Similarly, she blocked Senate Bill 1373, a proposal to create a state-managed reserve for digital assets obtained through seizures or legislative appropriations. Despite these vetoes, Hobbs has signed bills aimed at regulating the industry, including House Bill 2387, which imposes stricter rules on crypto ATMs to combat fraud and money laundering. HB 2324 now puts another major crypto policy decision in the governor's hands, testing her stance on the integration of digital assets into state operations.

HB 2324 follows HB 2749, signed in May, which allows Arizona to hold unclaimed crypto in its native form and divert staking rewards to a state fund. This earlier legislation changed unclaimed property regulations to allow crypto to be held in native form, with staking rewards diverted into a state crypto fund. The passage of HB 2324 further solidifies Arizona’s commitment to integrating digital assets into its financial framework, positioning the state as a leader in the adoption of cryptocurrency within government operations. The bill’s provisions for modern custody protocols and asset management options reflect a strategic effort to ensure the secure and efficient handling of seized digital assets, aligning with the state’s broader goals of innovation and financial transparency.