Quick Takes
- North Carolina became the 19th US State to introduce a digital asset reserve bill after House Speaker Destin Hall introduced the “NC Digital Assets Investments Act”, which permits the state treasurer to invest in high-market cap crypto assets.
- The proposed legislature directs the treasurer to allocate up to 10% of state-managed pension, insurance, and veterans funds for ETPs backed by cryptocurrencies with a market cap exceeding $750 billion over the past year.
- Currently, only Bitcoin (BTC), with its $1.9 trillion market cap, qualifies under North Carolina’s criterion. The state’s treasurer can directly hold Bitcoin ETPs or assign third-party investment firms as custodians, subject to annual audits and cost-benefit analysis.
- Crypto advocates have high hopes for North Carolina’s bill as it is sponsored directly by the state’s Speaker. NC could join Arizona and Utah as the first states to create a digital asset strategic reserve in America.
North Carolina joins a growing number of U.S. states exploring including Bitcoin (BTC) in their financial strategy after House Speaker, Representative Destin Hall, introduced House Bill 92 (HB92) to diversify the state’s assets by allowing its treasurer to invest in crypto assets.
North Carolina Speaker Proposed Bill To Invest 10% of State Funds In Bitcoin-Backed ETPs
Under the “NC Digital Assets Investments Act”, supported by pro-crypto lawmakers Rep. Mark Brody and Rep. Steve Ross, North Carolina would allocate up to 10% of various state funds and retirement systems into exchange-traded products (ETPs) linked to crypto assets with a market capitalization exceeding $750 billion, averaged over the past 12 months.
Although the draft legislation does not mention Bitcoin by name, only the flagship cryptocurrency currently qualifies to meet this criterion as it boasts a market cap of approximately $1.93 trillion. Ether (ETH), the second-largest cryptocurrency, only has a market capitalization of $324.66 billion, according to Coinmarketcap data.
The bill also suggests allocating a portion of state-managed funds such as pensions for teachers and government employees, insurance funds, and veterans’ home trust funds to invest in Bitcoin-linked investment products.
The State Treasurer may invest directly in Bitcoin-backed ETPs or rely on indirect third-party investment managers. In the latter case, the state would be allowed to enter into an arrangement with entities located within or outside the U.S., but the investment firms must provide audited financial statements to the treasurer unless the requirement is waived after a cost-benefit analysis.
Rep. Hall believes the NC Digital Assets Investments Act has the potential to generate positive yields for the state investment fund through Bitcoin and digital asset investments while positioning North Carolina as a leader in technological adoption and innovation.
In a subsequent X post, he added that the move aligns with President Trump’s vision for a national Bitcoin stockpile and ensures that North Carolina leads at the state level.
The bill’s co-sponsor, Mike Schietzelt, said that the state is poised to capitalize on emerging opportunities in blockchain technology, decentralized finance (DeFi), and other innovations in the crypto space that will “shape our future in many new ways”.
Meanwhile, Dan Spuller, head of industry affairs at crypto advocacy group the Blockchain Association, emphasized in an X post that, unlike digital asset investment proposals from other states, where they stalled before reaching the state house, North Carolina’s initiative will be taken seriously.
He believes the chances of the bill becoming law are high because it was personally introduced by House Speaker Destin Hall, considered one of the most powerful people in the state and is “top of the food chain”.
North Carolina Bans CBDC Usage And Sought To Regulate Bitcoin Mining
North Carolina has previously introduced pro-crypto bills through its legislature. Last year, the state’s House of Representatives passed legislation prohibiting government bodies from accepting payments made using central bank digital currencies (CBDCs). The state Senate even overrode the governor’s veto on the bill and passed it into law. It also forbids the U.S. Federal Reserve from conducting any testing of a “digital dollar” in North Carolina.
However, not all NC lawmakers are supportive of the crypto sector. Last April, Sen. Tim Moffit who represents Henderson, Polk, and Rutherford, proposed Senate Bill 774, which sought to prohibit or regulate Bitcoin mining operations in those counties.
The primary concerns with the data centers verifying transactions on the Bitcoin blockchain and minting new BTC are their high electricity consumption, and noise pollution generated by the fans needed to keep the servers from overheating. This has raised significant environmental concerns among NC communities in areas where the miners are based.
In 2023, Cherokee County requested more regulatory power from the state legislature to control Bitcoin mining operations, which failed to materialize. However, Henderson County passed a 60-day ban on new crypto mining operations, citing noise and heavy electricity usage as reasons for the moratorium.
Over Two Dozen US States Have Proposed Digital Asset Reserve Bills
With its digital asset investment bill, North Carolina joins an illustrious list of over 20 US states proposing diversifying their assets to include Bitcoin. According to the Bitcoin Reserve Monitor data, out of the two dozen states with a bill proposed, Arizona and Utah have advanced their legislation the furthest, while North Dakota rejected its legislation regarding a digital asset reserve.
At the time of writing, Bitcoin (BTC) is trading at $98,470 – down 0.55% in the last 24 hours.
