Michigan Weighs 10% Bitcoin Bet Amid Risk vs. Innovation Debate

Michigan’s proposed crypto reserve bill, which could permit the state to allocate up to 10% of its investment portfolio to Bitcoin, has advanced to a legislative committee for further review. The bill, introduced to diversify the state’s financial reserves, has sparked debate among policymakers and cryptocurrency advocates, with concerns over volatility, regulatory clarity, and long-term fiscal responsibility. The Michigan Department of Treasury has not yet commented on the specifics of the investment strategy or risk mitigation measures.

The legislation, which passed its initial reading in the House on September 19, 2025, would allow the state to direct a portion of its general fund into digital assets, primarily Bitcoin. Proponents argue that the move aligns with broader trends in institutional adoption of crypto and could position Michigan as a leader in state-level blockchain innovation. However, critics warn that Bitcoin’s price swings—exemplified by its 55% decline since the Dencun upgrade in 2025—pose significant risks to public funds. Advocates also highlight the lack of a robust regulatory framework for crypto investments, which could expose the state to legal uncertainties.

The bill’s progression to the House Financial Institutions and Insurance Committee marks a critical next step. Committee members will assess the feasibility of implementing the investment strategy, including potential partnerships with custodial platforms and compliance with federal securities laws. The Treasury Department’s role in overseeing the allocation of funds remains undefined, raising questions about accountability and oversight. If approved, the bill would require the state to establish a formal governance structure for crypto investments, including periodic reporting to the legislature.

Bitcoin’s performance since the Merge in 2022 has been mixed, with a 42.4% increase post-Transition to Proof-of-Stake but a subsequent 55.3% drop following the Dencun upgrade. This volatility underscores the risks associated with allocating public funds to a market with high uncertainty. While some analysts argue that Bitcoin’s correlation with traditional assets is low, others caution that its role as a “store of value” remains unproven in a diversified portfolio. The state’s current investment strategy, which includes a 10% allocation to alternative assets, would see Bitcoin replace existing holdings such as private equity or hedge funds.

The bill’s supporters, including several state representatives and blockchain industry groups, emphasize the potential for long-term gains and the need to keep pace with technological advancements. They cite examples like the Ethereum Fusaka upgrade, which introduced PeerDAS (Peer Data Availability Sampling) to enhance scalability, as evidence of crypto’s evolving infrastructure. However, opponents counter that Bitcoin’s lack of intrinsic utility and energy-efficient consensus mechanisms make it an unsuitable choice for public funds. The debate mirrors similar discussions in states like Colorado and New York, where crypto investment proposals have faced scrutiny over transparency and environmental impact.

If enacted, the bill would require the state to conduct a feasibility study and draft a risk management plan by January 2026. This timeline aligns with the Ethereum community’s focus on incremental upgrades, such as the Fusaka hard fork scheduled for December 3, 2025, which aims to improve data availability and gas efficiency. The Michigan bill’s success will depend on its ability to balance innovation with fiscal prudence, a challenge that reflects broader tensions in the crypto ecosystem. As the committee deliberates, stakeholders will closely monitor developments in both state legislation and the cryptocurrency market.