Arizona Passes Bill to Create Crypto Reserve Fund from Seized Assets

Arizona lawmakers have passed House Bill 2324, which would establish a state-managed crypto reserve fund sourced from seized digital assets. Following a June 24 voting session, Arizona’s House of Representatives approved the bill in a 34-22 vote. The legislation cleared the state Senate on June 20 by a narrow 16-14 margin. Lawmakers had to revive HB 2324 through a series of procedural motions after it failed to clear the House on May 7. Republican Senator Janae Shamp, who initially opposed the bill, moved to have it reconsidered in the Senate, paving the way for its eventual return to the House and final approval.

House Bill 2324 now heads to Governor Katie Hobbs, whose approval would enact the bill into law. While Hobbs has signed certain crypto-related measures this year, her stance on exposing state resources to cryptocurrency markets has been cautious. HB 2324 would establish a “Bitcoin and Digital Assets Reserve Fund” managed by the state treasurer. The fund would be exclusively financed through digital assets seized in criminal investigations, including Bitcoin, stablecoins, and other virtual currencies. It does this by updating Arizona’s forfeiture laws to explicitly include digital assets and outlining procedures for seizure, custody, and liquidation.

Under the proposed allocation structure, the first $300,000 from forfeited digital assets would be directed to the Attorney General’s office. Additional proceeds would be split between the Attorney General, the state general fund, and the newly created reserve. The bill also includes provisions to protect innocent property owners and imposes limits on when other assets, such as vehicles, may be seized in connection with digital crimes. HB 2324 is the second major cryptocurrency-related measure to advance in Arizona this year. In May, Governor Hobbs signed House Bill 2749 into law, authorising the state to take custody of unclaimed digital assets, such as inactive crypto wallets, after a three-year dormancy period. HB 2749 also established a reserve fund managed by the treasurer, though its funding comes from unclaimed assets rather than criminal forfeiture. It permits the state to stake these assets or accept airdrops, with all proceeds directed into the fund and no taxpayer exposure. Unlike HB 2324, HB 2749 is purely administrative, focusing on property that the state already controls by statute.

Neither of these bills authorizes Arizona to directly invest taxpayer money or treasury funds into Bitcoin or other digital assets. However, such a proposal was made earlier this year in Senate Bill 1025, the Arizona Strategic Bitcoin Reserve Act, which would have allowed up to 10% of public funds to be allocated to Bitcoin. Governor Hobbs rejected SB 1025 over concerns about exposing public funds to crypto market volatility. A companion bill, SB 1373, which proposed creating a state-run reserve using seized assets and appropriations, was also blocked at the time.

The Arizona House of Representatives has passed a significant bill, HB 2324, which aims to establish a reserve fund for managing seized cryptocurrencies. This legislation authorizes the state to hold digital assets, specifically Bitcoin, that have been confiscated through criminal forfeiture. 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. The passage of HB 2324 marks a strategic shift in Arizona's approach to cryptocurrency regulation. Previous attempts to create a Bitcoin reserve either failed or were vetoed by the governor. These earlier efforts proposed direct state investment in digital currencies, which raised concerns and faced executive scrutiny. In contrast, HB 2324 focuses on placing forfeited assets into a reserve fund, thereby addressing these concerns and increasing the likelihood of the bill becoming law.

The bill's key features include the creation of a "Bitcoin and Digital Assets Reserve Fund" using cryptocurrencies obtained through law enforcement seizures. This approach avoids speculative investments and ensures that the assets come solely from criminal forfeiture. By adopting this measured strategy, lawmakers hope to establish responsible asset management and avoid the obstacles encountered in previous legislative cycles. The bill's passage reflects Arizona's continued experimentation with cryptocurrency governance. The state has shown both ambition and caution in its approach to digital assets, and this legislation encourages innovation while addressing executive scrutiny. The use of current forfeiture frameworks in HB 2324 marks a meaningful change, as it provides a structured approach to managing seized cryptocurrencies.

The final step in the legislative process is Governor Katie Hobbs' decision. Many observers expect her previous concerns, which led to earlier vetoes, to be minimized due to the structured approach of this bill. However, technology advocates, law enforcement, and policymakers are watching carefully as the governor's decision will shape Arizona's future cryptocurrency regulations. Arizona's move mirrors a broader trend: states are integrating digital assets into fiscal operations while striving to build public trust. By relying on criminal asset forfeiture, HB 2324 might provide a model for gradual, responsible integration of emerging technology. Regardless of the outcome, the debate and legislative process will shape Arizona's future cryptocurrency regulations and set a precedent for other states considering similar measures.