Michigan Crypto Reserve Bill Advances To Second Reading

Michigan has taken the next step for its strategic crypto reserve bill, which moved to a second reading on Thursday. 

The Michigan House Bill 4087, which would allow the state to invest in crypto assets under specific conditions, has moved to a second reading and was referred to the Committee on Government Operations.

The legislation amends the Michigan Management and Budget Act to establish guidelines for a strategic crypto reserve, though it does not mention Bitcoin (BTC) specifically. 

It comes amid a recent lull in developments around state-level Bitcoin reserves. 

The bill was introduced by Republican Representatives Bryan Posthumus and Ron Robinson in February and would permit the state treasurer to invest up to 10% of funds from Michigan’s “countercyclical budget” and “economic stabilization fund” in cryptocurrency.

The bill stipulates that the state must hold the crypto assets through one of three approved methods: a “secure custody solution,” a qualified custodian such as a bank, trust company, or state-regulated company, or exchange-traded products from registered investment companies.

The state can also loan out cryptocurrency to generate additional returns if it doesn’t increase financial risk. 

Crypto reserve bill isn’t limited to Bitcoin

The bill also provides detailed technical security requirements for custody solutions, including exclusive government control of private keys, end-to-end encryption, no smartphone access, geographically diversified secure data centers, multiparty transaction authorization, and regular security audits.

Related: Michigan pension fund deepens Bitcoin exposure with $11M stake in ARK ETF

It does not specify which digital assets can be used for the strategic reserves beyond this criterion:

“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.”

Michigan Bitcoin Trade Council in opposition

The Michigan Bitcoin Trade Council has opposed the bill because “there is no market capitalization number listed in the legislation that would prevent other cryptocurrencies other than Bitcoin from being bought by the state.”

The state Bitcoin advocacy group claims that allowing other crypto assets to be part of a strategic crypto reserve would be “creating unnecessary risk,” as all other cryptocurrencies other than Bitcoin are “centralized and subject to great risk.”