Connecticut governor signs law blocking state from establishing Bitcoin reserve

Key Takeaways

Connecticut has passed a law preventing the state from purchasing Bitcoin.
The new legislation adds Connecticut to a small group of states restricting government crypto investments.

Connecticut will not be buying, holding, investing in, or building any Bitcoin or crypto reserves, at least not under Governor Ned Lamont.

The state leader on Monday signed House Bill 7082, or HB 7082, into law, effectively blocking the state and its municipalities from accepting digital assets as payment or maintaining any reserves of virtual currency in public funds.

Unveiled earlier this year, HB 7082 introduces broad reforms to the regulation of money transmission businesses, consumer protections, and digital financial services. One of its most consequential provisions is found in Section 5, which states:

“Neither the state nor any political subdivision of the state shall accept or require payment in the form of virtual currency for an amount due to the state or the political subdivision, or purchase, hold, invest in, or establish a reserve of virtual currency,” according to the bill’s text.

Virtual currency, as defined by the law, encompasses decentralized digital assets like Bitcoin and Ethereum, along with centralized tokens or other digital forms of value. The provision blocks state and local entities from adopting crypto in any area of public finance, from holding reserves to accepting taxes or piloting blockchain payments.

Apart from a formal restriction on the state’s ability to invest in digital assets, HB 7082 also updates Connecticut’s money transmission laws. It expands the legal definitions to include digital wallets, virtual currency kiosks, and the custody or transfer of virtual assets, ensuring that crypto-related services fall within state regulation.

Businesses holding or transmitting virtual currency on behalf of others will be required to be licensed, unless they’re exempt, like banks or credit unions. Licensees must maintain full 1:1 reserves matching customer obligations and may only use approved custodians.

HB 7082 also introduces stricter compliance standards, including enhanced consumer disclosures and limits on how customer assets can be used.

Connecticut’s new law follows in the footsteps of Arizona’s governor. In May, Governor Katie Hobbs vetoed Senate Bill 1025 that would have allowed the state to invest a portion of its assets in Bitcoin.

Still, Governor Hobbs signed House Bill 2749, which takes a different approach by establishing a reserve fund for Bitcoin and other digital assets, though limited to assets obtained via airdrops, staking rewards, or interest.

Connecticut’s new law adopts a more restrictive stance, not only banning crypto investments but also explicitly prohibiting its use for payments at the state and local levels, even as other states weigh more open crypto reserve strategies.