Michigan advances bill to establish crypto reserve

TL;DR Breakdown

• Michigan advances bill to establish a strategic crypto reserve.
• The bill was stalled for seven months until now.
• The bill allows up to 10% of existing funds to be invested in crypto.

Michigan’s House bill to establish a strategic crypto reserve has advanced to the committee stage, allowing the state treasurer to invest up to 10% of the available funds in each of its existing funds in cryptocurrency.

The bill was initially proposed in February of this year by Representatives Bryan Posthumus and Ron Robinson and has now been moved to a second reading and referred to the Committee on Government Operations.

The bill would enable the state treasurer to invest 10% of available funds from the General Fund and the countercyclical budget and economic stabilization fund in cryptocurrency.

While the bill does not state what cryptocurrencies shall be included in the crypto reserve, it states a criterion for defining a cryptocurrency, reading “digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, and that operates independently of a central bank.”

The bill also lists three approved methods of holding cryptocurrencies. It states that the State Treasurer must hold the cryptocurrencies directly through one of three ways.

1. A secure custody solution
2. A qualified custodian, i.e., a chartered bank, trust, or depository institution, or a company approved to hold custody of cryptocurrency.
3. An exchange-traded product issued by a registered investment company.

The legislation aims to amend the Management and Budget Act by adding section  351a. The bill also empowers the treasurer to loan out the cryptocurrencies if it would not increase the financial risk to the state and yield further returns.

Other crypto reserves

According to BitcoinLaws.io, Michigan is not alone in this pursuit, as around 25 US States are actively reviewing similar proposals. Moreover, states like New Hampshire and Texas have already set up their strategic crypto reserves to invest in Bitcoin. On the other hand, Arizona does not allow the state to use funds to buy cryptocurrency but allows seized digital assets to fund its Bitcoin & Digital Assets Reserve Fund.