Arizona Lawmakers Approve a State Crypto Reserve. Other States Could Follow.
By Kenneth CorbinArizona's legislature has sent two bills to the governor's desk that would authorize the formation of a strategic reserve of digital currency, which would make it the first state in the nation to do so.The move follows the Trump administration's establishment of a federal reserve of digital currencies and comes amid similar efforts in state legislatures around the country, some of which have already been shot down.On Monday, the Arizona legislature approved a bill that would authorize the creation of a strategic reserve fund seeded with digital assets seized by the state, following the funding model of the federal crypto reserve.The other bill the House approved authorizes the state treasurer to store up to 10% of the state's public money and its retirement system in a virtual currency fund.Votes on the Arizona bills ran essentially along party lines, passed with heavy Republican support and near-universal Democratic opposition.The office of Gov. Katie Hobbs, a Democrat, declined to comment on whether she plans to veto the bills.Matthew Sigel, head of digital assets research at VanEck, says he thinks Arizona Democrats will pressure Hobbs to veto the crypto reserve bills, though he acknowledges that any prediction about what action the governor will take would be "speculative."Even if Hobbs vetoes the bills, other states are considering similar legislation, and Sigel thinks it is only a matter of time before one passes."My guess is one of these bills is going to pass because the incentives are so strong," he says. "When the dollar leaks value like it is right now, the states are often the ones left holding the bucket, so Bitcoin becomes very tempting...States can't print money, so they actually have a higher motivation to try to explore these stored-value techniques with the reserves that they have."Bitcoin also offers a chance to monetize otherwise "stranded energy," according to Sigel. Electricity is the No. 1 input into Bitcoin mining, he says, and any mining operation without competitively priced energy is bound to lose money. For states with abundant energy from renewables such as solar and wind but without the distribution capacity to relay those resources to the coastal population centers, setting up a crypto mining operation can put that energy to use at a relatively low cost.Momentum has been building for initiatives such as the Arizona legislation since Trump came back to power and has emerged as a full-throated crypto advocate, including his own family's venture in the space, which has raised questions about potential conflicts of interest."The tone starts at the White House," says Sigel, who notes that Trump often mentions crypto alongside energy independence and artificial intelligence. "The three are inextricably linked. Bitcoin and AI both require a lot of energy. You can only make money Bitcoin mining when you have a very cheap cost of energy."Write to [email protected] content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.