Michigan Advances Bill to Create State Crypto Reserve

Michigan lawmakers are moving closer to allowing the state to hold cryptocurrency as part of its financial strategy. On Thursday, House Bill 4087 passed a second reading and was referred to the Committee on Government Operations, marking the latest step toward establishing a state-run crypto reserve.

Introduced in February by Republican Representatives Bryan Posthumus and Ron Robinson, the proposal would amend the Michigan Management and Budget Act to let the state treasurer invest up to 10% of funds from the state’s “countercyclical budget” and “economic stabilization fund” in digital assets. 

While the bill does not mention Bitcoin by name, it sets out strict requirements for how any cryptocurrency must be stored and managed.

Strict Custody and Security Rules

If enacted, the legislation would allow Michigan to hold crypto in three approved ways: through a “secure custody solution,” a qualified custodian such as a bank or trust company, or via exchange-traded products from registered investment firms. The bill also permits the state to loan out its crypto holdings to generate extra returns, provided the move does not increase financial risk.

Security standards are detailed and extensive. Private keys must remain under exclusive government control, with end-to-end encryption, no smartphone access, geographically diversified data centers, multiparty transaction authorization, and regular independent audits. 

The measure defines eligible assets only 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.”

Debate Over Asset Selection

The Michigan Bitcoin Trade Council has voiced strong opposition, arguing the bill leaves room for the state to invest in cryptocurrencies beyond Bitcoin. The group warns that allowing other digital assets introduces “unnecessary risk,” claiming many alternative coins are more centralized and less secure.

Supporters, however, say the bill provides Michigan with flexibility to adapt to a rapidly evolving financial landscape. Similar strategic crypto reserve proposals have emerged in Massachusetts and Ohio, while states including New Hampshire, Arizona, and Texas already permit treasurers to invest in Bitcoin and other cryptocurrencies.

According to the Bitcoin Reserve Monitor, at least 17 additional states are considering comparable legislation, though several—including Montana, North Dakota, South Dakota, Wyoming, and Pennsylvania—have rejected such measures. 

Michigan’s progress signals a renewed interest in exploring crypto as a potential hedge and revenue generator at the state level, even amid ongoing debate over which digital assets deserve a place in public funds.