Michigan has taken another step toward establishing a state-level cryptocurrency reserve.
The proposal, House Bill 4087, advanced to its second reading on Thursday and was referred to the Committee on Government Operations for further review.
Introduced in February by Republican Representatives Bryan Posthumus and Ron Robinson, the legislation seeks to amend the Michigan Management and Budget Act to allow a portion of the state’s stabilization funds to be invested in digital assets.
Details of the Proposal
The bill authorizes the state treasurer to invest up to 10% of money from Michigan’s “countercyclical budget” and “economic stabilization fund” into cryptocurrencies.
While Bitcoin is not explicitly mentioned, the legislation creates a framework for a “strategic Crypto reserve” under certain conditions.
To manage these investments, the bill lays out three permissible custody methods: through a “secure custody solution,” with a qualified custodian such as a bank or trust company, or through exchange-traded products from registered investment companies.
The state would also be permitted to lend out its digital holdings to generate additional returns, provided that such actions do not increase financial risks.
Security Measures and Asset Definitions
The legislation sets out strict technical requirements for custody solutions.
These include exclusive government control of private keys, end-to-end encryption, no smartphone access, geographically diversified data centers, multiparty authorization for transactions, and regular audits.
The bill defines eligible assets broadly as “digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, and that operates independently of a central bank.”
This definition opens the door for a wide range of cryptocurrencies, not just Bitcoin.
Pushback from Advocacy Groups
The Michigan Bitcoin Trade Council has voiced strong opposition to the bill.
The group argues that the lack of a market capitalization threshold in the legislation could expose the state to riskier assets beyond Bitcoin.
According to the council, “there is no market capitalization number listed in the legislation that would prevent other cryptocurrencies other than Bitcoin from being bought by the state.”
The advocacy group further warned that allowing investment in non-Bitcoin assets would be “creating unnecessary risk,” since other cryptocurrencies are “centralized and subject to great risk.”
National Context
Michigan is not alone in pursuing this path.
According to Bitcoin Laws, similar bills have reached the committee stage in Massachusetts and Ohio.
So far, only New Hampshire, Arizona, and Texas have successfully enacted legislation permitting state treasurers to invest in digital assets.
Elsewhere, similar initiatives have failed in Montana, North Dakota, South Dakota, Wyoming, and Pennsylvania.
At least 17 other states are currently considering bills on this issue, according to Bitcoin Reserve Monitor.
For Michigan, the debate highlights a growing divide between those advocating for broader exposure to crypto assets and those who believe only Bitcoin is suitable for such reserves.