(Bloomberg) -- While the push for state governments to hold digital assets in one way or another generated momentum earlier this year, crypto reserve bills in four states have failed over the last month.
“There’s a well-deserved perception of volatility in terms of Bitcoin and all digital assets,” said Jennifer Schulp, director of financial regulation studies at the Cato Institute in Washington. “I think that’s going to continue to be an issue even as the digital assets environment continues to be a positive one.”
Lawmakers in Montana, North Dakota, South Dakota and Wyoming have all voted against establishing state-level crypto reserves in the last few weeks, citing concerns over risk and volatility associated with digital assets. Strategic crypto reserve bills have been introduced in 24 states so far, according to database Bitcoin Laws.
Bitcoin has tumbled about 20% since reaching a record high of around $109,000 hours before the January inauguration of President Donald Trump. Most reserves are typically invested in low-risk assets such as short-term bonds since they’re normally used to set aside money for future use.
South Dakota’s reserve bill, which proposed that the state allocate up to 10% of state funds to Bitcoin, lost in a House of Representatives vote a few days ago, as lawmakers voted to postpone the bill. Meanwhile, Montana’s proposal failed in a 41-59 vote in the House last week.
Trump and Senator Cynthia Lummis first introduced the idea of a national strategic Bitcoin stockpile at an industry conference in Nashville in July. In January, Trump signed his long-awaited executive order on cryptocurrencies, which called for studying the feasibility of creating a digital asset stockpile rather than declaring that Bitcoin would be at the focal point of a national reserve. In addition to state legislation, Schulp pointed to the slowed movement toward a reserve in Washington.
“It makes sense that if on a national level, an administration that is very pro-crypto is taking some time to consider a strategic Bitcoin reserve, states would also be doing the same thing and not jumping in with two feet,” Schulp said.
The bill from Lummis, a Wyoming Republican, calls for the US to acquire 1 million Bitcoin, while Trump’s initial proposal required the government to maintain ownership of the roughly 200,000 tokens that the US already possesses following asset seizures. But even the measure in Lummis’ home state to allow investment specifically in Bitcoin failed in the House in early February, with only one representative voting in favor of the bill.
The idea of a “strategic reserve” has generated momentum beyond states with Trump’s DeFi project, World Liberty Financial. Chase Herro, World Liberty’s co-founder, said earlier this year that the platform plans on creating a “strategic reserve” with tokens bought. Ohio, which recently introduced proposals to establish a crypto reserve in the House and a Bitcoin reserve in the Senate, also remains optimistic about the merits of its bills, despite concerns in other states around volatility.
“I think any investment that isn’t just a traditional bond or something that’s very safe typically deals with some measure of risk,” said Andrew Burchill, executive director of the Ohio Blockchain Council. “From our measure, Bitcoin has been the best performing asset over the last decade compared to any traditional investment. And so from that perspective, if we’re thinking long term, the volatility is less of a risk.”
And in Oklahoma, a strategic Bitcoin reserve act passed the state’s Government Oversight Committee Tuesday. However, the willingness across the board to prioritize using public state funds to invest in crypto still remains to be seen.
“I think this does raise a lot of questions in terms of whether or not the policy is a good one and what the implementation of that policy would even look like,” Schulp said. “And those questions become even more complex when states all have their own rules about budgeting and investing.”
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