Michigan Advances Bill to Create State-Owned Crypto Reserve

Michigan has accelerated its push to establish a state-owned crypto reserve, with a key bill advancing to its second reading after months of legislative standstill. If passed, the measure will allow the peninsular state to hold 10% of its investment in digital assets.

House Bill 4087 to Establish State-Level Crypto Reserve

On Thursday, Michigan lawmakers moved House Bill 4087 to the Committee on Government Operations after the measure was cleared for a second reading. After months of inactivity, the revised pitch seeks to set clear guidelines for establishing a state-level crypto reserve by amending the Michigan Management and Budget Act. 

Market participants praised the bill’s timing, which comes as U.S. lawmakers and top crypto industry players meet to discuss a strategic Bitcoin reserve. 

Republican Representatives Bryan Posthumus and Ron Robinson sponsored the bill in February.

Here is what the measure stipulates:

• The bill authorizes Michigan’s state treasurer to invest up to 10% of the countercyclical budget and economic stabilization fund in cryptocurrency, although not restricted to Bitcoin.
• Digital assets must be held through one of three channels: a secure custody solution, a qualified custodian (such as a bank, trust company, or state-regulated firm), or exchange-traded products from registered investment companies.
• Michigan may also lend out cryptocurrency holdings to generate returns, provided it does not heighten financial risk.
• Custody solutions are required to follow rigorous security protocols, such as government-only control of private keys, full encryption, restricted smartphone access, storage in multiple secure locations, approval from multiple parties for transactions, and routine security audits.

Meanwhile, the measure also establishes guardrails to ensure regulatory compliance and security for state-held crypto assets.

Michigan Bitcoin Council Opposes Digital Asset Reserve Bill

Surprisingly, the Michigan Bitcoin Trade Council has opposed the bill, citing the lack of an injunction that would prevent the state from purchasing other crypto assets. According to the advocacy group, including additional crypto assets in the reserve would create “unnecessary risk,” since most digital coins besides Bitcoin carry centralization risks.

Bitcoin is the ONLY stable cryptocurrency and the only instrument that would be prudent for the state to invest in. This is why we do not support House Bill 4087 and encourage people to reach out to lawmakers to oppose the legislation.

Michigan Bitcoin Trade Council

With Bitcoin hovering around $116,871, some market observers caution that the state could be buying at a peak valuation.

U.S. States Diverge on Strategic Crypto Reserve

Michigan, Massachusetts, and Ohio are now the only states whose strategic crypto reserve proposals have reached the committee stage. Following legislative progress, New Hampshire, Arizona, and Texas have also joined the growing list of states exploring Bitcoin and other digital assets as a financial hedge.

Montana, Wyoming, Pennsylvania, and the Dakota states are among the jurisdictions that have rejected Strategic Bitcoin Reserve bills. According to Bitcoin Reserve Monitor, 17 other states still have pending status regarding the bill.

This month, the U.S. lower chamber advanced an appropriations bill directing the Treasury Department to examine the potential creation of a Strategic Bitcoin Reserve. Under the act, the department will explore how the asset would be governed and safeguarded, with a specific focus on security, custody, and economic stability.