Arizona becomes second state to create cryptocurrency reserve fund
A new state law takes two big steps on cryptocurrency, including making Arizona the second state in the U.S. to create a reserve fund for virtual currency.
State of play: Gov. Katie Hobbs on May 7 signed legislation updating Arizona's unclaimed property laws for cryptocurrency and creating the Bitcoin and Digital Assets Reserve Fund.
Under current laws, abandoned assets like stocks are transferred to the state in their "native" form, but cryptocurrency that goes unclaimed for three years is liquidated.
The new law will require the state to hold digital assets for three years before they're sold.
Interest-type returns that investors can earn on cryptocurrency, like staking rewards and airdrops, will go into the reserve fund in their digital form. Once it's in the reserve fund, the state treasurer can seek legislative approval to deposit 10% of the money from the reserve into the state's general fund.
Why it matters: Arizona investors who claimed the money from their abandoned assets have lost out in the past because the value of their crypto increased after it was sold.
Context: Bill sponsor Rep. Jeff Weninger (R-Chandler) noted that Bitcoin was worth about $16,000 two years ago, but is now valued at more than $100,000.
Yes, but: It's unclear how much the state receives in unclaimed crypto assets per year.
What they're saying: Weninger believes the law to be the nation's first of its kind and said in a press statement that "we are modernizing our laws to reflect crypto's position as the future of finance and ensuring Arizonans receive the full market value of their assets."
"There's no doubt that Arizona is a national trailblazer on smart digital asset policy," Ashley Gunn, head of state policy for cryptocurrency exchange Coinbase, said in a statement to Axios, adding the legislation "will undoubtedly pave the path for more statewide innovation across the country."
Zoom out: Two days before Hobbs signed the legislation, Republican New Hampshire Gov. Kelly Ayotte signed a bill making hers the first state to create a state crypto reserve.
It goes much further than the Arizona bill, allowing New Hampshire to invest up to 5% of state funds in digital assets and precious metals, though it doesn't require investments.
Between the lines: Hobbs wasn't willing to go as far as her New Hampshire counterpart, vetoing legislation earlier this month to create a strategic Bitcoin reserve and to allow the state to invest up to 10% of its funds in cryptocurrency.
She wrote in her veto letter that state retirement funds "are not the place for the state to try untested investments like virtual currencу."
Lawmakers sent another, similar bill to Hobbs last week.
What's next: Weninger is also pushing legislation that would put a portion of cryptocurrency in the reserve fund when obtained by the state through asset forfeiture in criminal cases.
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