Michigan Cryptocurrency Reserve Legislation Moves to Second Reading Stage

Michigan has progressed with its strategic crypto reserve bill, moving to a second reading on Thursday.

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

This legislation modifies the Michigan Management and Budget Act to set guidelines for a strategic crypto reserve, although it does not specifically mention Bitcoin (BTC).

This development comes during a recent pause in state-level activity concerning Bitcoin reserves.

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

The legislation requires the state to hold crypto assets through one of three approved methods: a “secure custody solution,” a qualified custodian such as a bank, trust company, or state-regulated entity, or exchange-traded products from registered investment firms.

The state may also lend cryptocurrency to generate additional returns, provided it does not increase financial risk.

Crypto reserve bill isn’t limited to Bitcoin

Additionally, the bill outlines specific technical security requirements for custody solutions, including exclusive government control of private keys, end-to-end encryption, restricted smartphone access, geographically diverse secure data centers, multiparty transaction authorization, and regular security audits.

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

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

“Digital currency in which encryption techniques are employed to control the generation of units and verify the transfer of funds, and that operates autonomously from a central bank.”

Michigan Bitcoin Trade Council in opposition

The Michigan Bitcoin Trade Council has opposed the bill, arguing that “there is no market capitalization number specified in the legislation that would prevent the state from purchasing cryptocurrencies other than Bitcoin.”

The Bitcoin advocacy group claims that including other crypto assets in a strategic reserve would “create unnecessary risk,” since all other cryptocurrencies besides Bitcoin are “centralized and subject to significant risk.”