Connecticut Bans State Crypto Use, Enhances Consumer Protection

Connecticut has taken a decisive step to restrict the use of digital assets within its state government operations. Governor Ned Lamont signed House Bill 7082 into law, which prohibits the state government from accepting payments in virtual currency or establishing a crypto reserve for any operational or investment purposes. This legislation, which passed through the state’s House of Representatives and Senate, will take effect on October 1, marking a clear policy direction away from direct state-level crypto engagement.

The bill, introduced by state Representative Jason Doucette, also includes additional requirements for crypto money transmission licensees operating in Connecticut. These measures aim to enhance consumer protection while restricting government crypto transactions. This move contrasts with initiatives in other states, such as New Hampshire and Texas, which have recently moved to establish state-run cryptocurrency reserves as part of their financial infrastructure strategies.

Brogan Law founder Aaron Brogan described Connecticut’s move as largely symbolic, noting that it signals the state’s opposition to cryptocurrency and the establishment of Bitcoin reserves by other states. Brogan emphasized that the bill would have minimal impact on broader market dynamics, highlighting the growing national debates on cryptocurrency use, particularly under Donald Trump’s administration, which has expressed support for expanding federal crypto holdings.

While Connecticut enacts restrictions on state crypto involvement, other states remain open to the potential of digital assets. Texas Governor Greg Abbott approved legislation in June to establish a crypto reserve, and New Hampshire Governor Kelly Ayotte signed a similar bill in May. At the federal level, Trump signed an executive order earlier this year to create a “Strategic Bitcoin Reserve” and a “Digital Asset Stockpile,” signaling a contrasting approach to crypto in government reserves.

Efforts to pass Bitcoin reserve bills have failed in states such as South Dakota, Montana, and Pennsylvania, indicating the divided policy landscape across the country. As Connecticut enacts its restrictions, it highlights the ongoing debate within the United States over how digital assets should interact with public finances and state governance. The legislation reflects a cautious approach to digital assets, prioritizing financial stability and consumer protection over the potential benefits of crypto adoption.

The law defines virtual currency to include decentralized digital assets like Bitcoin and Ethereum, as well as centralized tokens and other digital forms of value. This definition ensures that the ban covers a wide range of cryptocurrencies, preventing the state from adopting crypto in any area of public finance. This includes holding reserves, accepting taxes in crypto, or piloting blockchain payments.

In addition to the ban on crypto investments and payments, HB 7082 updates Connecticut’s money transmission laws. It expands the legal definitions to include digital wallets, virtual currency kiosks, and the custody or transfer of virtual assets. This ensures that crypto-related services fall within state regulation, requiring businesses holding or transmitting virtual currency on behalf of others to be licensed. Exemptions are made for banks and credit unions. Licensees must maintain full 1:1 reserves matching customer obligations and may only use approved custodians.

The law also introduces stricter compliance standards, including enhanced consumer disclosures and limits on how customer assets can be used. These measures are designed to protect consumers and ensure that crypto-related services operate within a regulated framework. The legislation reflects a cautious approach to digital assets, prioritizing financial stability and consumer protection over the potential benefits of crypto adoption.