Connecticut bans crypto reserves for authorities – a first in the USA!

Connecticut bans crypto reserves for authorities – a first in the USA!

The US state of Connecticut has become the first in the country to enact a comprehensive ban on government entities from holding digital assets. Gov. Ned Lamont signed legislation (House Bill 7082) on June 30 that establishes an explicit requirement that all government entities hold exactly $0 in digital assets. This law, known as Public Act No. 25-66, was passed unanimously by the General Assembly with no dissenting vote.

The ban is in response to the volatility of the crypto market and the lack of clarity surrounding regulation at the federal level. Connecticut is committed to protecting taxpayer dollars while minimizing financial risks associated with digital assets.[ newsbit ] In contrast, other states like Texas, which added $10 million in Bitcoin to its state reserves, show that there are other approaches to investing in cryptocurrencies.[ decrypt ]

Legal framework

In addition to banning holding and investing in digital currencies, the new law contains strict consumer protection measures. It requires crypto companies to make extensive disclosures about all material risks associated with virtual currencies. Warnings must also be displayed to protect users from the risks of loss due to fraudulent or accidental transactions. This includes provisions requiring users under 18 to be subject to certain verification requirements and comprehensive disclosure requirements for crypto transactions.[ newsbit ]

This legislation revises Connecticut's money transfer statutes and establishes new definitions for digital wallets, controllers, and kiosks. State-licensed companies must follow strict compliance frameworks, which severely limits the use of crypto in the state.[ decrypt ]

The national trend and inconsistencies

Connecticut's move contrasts with a national trend in which some states, including New Hampshire, have already established crypto reserves. New Hampshire became the first state to legally approve a crypto reserve, but has not yet purchased tokens. Arizona, on the other hand, has established a reserve fund with confiscated cryptocurrencies. These initiatives stand in contrast to Connecticut’s hawkish stance and highlight growing disagreement over the role of cryptocurrencies in state treasury management.[ decrypt ]

Overall, Connecticut’s ban shows that the discussion about digital assets and their role in the public sector is intensifying. While some states view crypto as a strategic asset, Connecticut maintains a strict approach to minimize financial risks and protect taxpayer dollars.[ newsbit ]