Key Points:
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New legislation would help establish a regulatory framework for cryptocurrency
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One law would establish a cryptocurrency reserve fund
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Another seeks to regulate cryptocurrency kiosk operators
Gov. Katie Hobbs signed a bill on May 7 that will allow the state to establish a cryptocurrency reserve fund and account for unclaimed digital currency assets.
The bill was one of a series of cryptocurrency measures Hobbs signed into law that aims to establish a regulatory framework and address the virtual currency’s growing use among individuals and businesses.
The other laws include regulating cryptocurrency ATM operators to protect users from scams and prohibit municipalities from regulating computational power in a home.
Rep. Jeff Weninger, R-Chandler, introduced the legislation that will update the state’s unclaimed property laws to include cryptocurrency and create a Bitcoin and digital assets reserve fund for investment returns on the currency.
The state treasurer would be able to deposit 10% of digital assets into the state general fund upon legislative approval.
The law will allow abandoned digital assets to be delivered to the Department of Revenue in their native form instead of being liquidated and sent as money.
“This law ensures Arizona doesn’t leave value sitting on the table and puts us in a position to lead the country in how we secure, manage and ultimately benefit from abandoned digital currency,” Weninger said in a press release on May 7 after the bill was signed.
The law establishes a “baseline” for a state level reserve with the seized digital assets, said Stephen Cole, founder and CEO of Orqestra, a company that builds software to help businesses establish and manage Bitcoin treasuries.
Cole said he would like the law expanded to allow the state to invest more in digital assets.
“I would love to see Arizona do even more, because the limitation on that bill is that it doesn’t really allow investment managers of public funds to decide how much of it is appropriate for the state to invest,” Cole said. “It really is just a function of how much property happens to have been seized, and so I think that we will see other states allow their investment managers to make strategic allocations to this as they follow the market, see more institutional validation and comfort with this asset.”
Although the law received bipartisan support as it passed through the Legislature, some Democrats opposed the legislation, saying current laws already account for unclaimed digital assets.
Sen. Mitzi Epstein, D-Tempe, said this law will “prop up” the price of digital currencies such as Bitcoin.
“If they can convince enough legislators in states to create Bitcoin reserves, then those will help prop up the price of Bitcoin, and that’s foolish, because we should not be in the business of propping up the price of anything. That’s picking winners and losers,” Epstein said.
Epstein is skeptical of cryptocurrency because she views it as a volatile investment, she said.
“It is as close to a ponzi scheme as you can get without being a ponzi scheme,” she said.
Epstein supported another recently signed law that regulated cryptocurrency ATM operators.
Rep. David Marshall, R-Snowflake, introduced the bill after hearing of scams targeting senior citizens.
The law would establish requirements for operators to disclose terms and conditions associated with the operator and virtual currency, provide receipts for each transaction and allow 72 hours for users to receive a refund.
It would also prohibit an operator from accepting more than $2,000 in one day from a new customer.
Marshall said at a March 26 Senate Judiciary and Elections Committee hearing that he invests in cryptocurrency and knows the market could confuse people.
“If you’re not familiar with it, you’re easily defrauded, especially if you’re a senior citizen,” Marshall said at the hearing.
Cole said establishing a clear regulatory framework is the best way to counter scams. However, he said, those incidents shouldn’t deter the state from embracing cryptocurrency when it is rapidly growing.
“Those who are late to adopt and who are kind of dragged along into this, they’ll still get there, but they will miss out on a lot of opportunity,” he said.
