Arizona could soon invest public funds in crypto, following the Legislature’s approval of two Bitcoin-related bills. 

On Monday, lawmakers in both chambers passed Senate Bills 1025 and 1373, paving the way for the state’s treasury and retirement system to allocate up to 10% of their funds into virtual currencies. These measures now await Governor Katie Hobbs’ signature to become law. 

BLOOMBERG: Arizona Lawmakers Back Bitcoin Investments in First Among States pic.twitter.com/5GzjbDIg68

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Framework for Public Crypto Investment 

Senate Bill 1025, officially titled “Public Monies; Investment; Virtual Currency,” introduces a framework that enables public funds to invest directly in cryptocurrencies. It defines virtual currency as a digital representation of value functioning as a medium of exchange, unit of account, and store of value, excluding U.S. and foreign fiat currencies. 

The legislation limits these investments to 10% of total funds managed by the state treasurer and retirement systems. This structured approach aims to diversify public fund holdings through a controlled introduction of Bitcoin, while maintaining a clear separation from traditional currencies.

The bill passed the Senate with a 17-11 vote and cleared the House 31-25. Notably, a few Democratic lawmakers joined the Republican majority in support. 

Custody Defined in Companion Bill

Senate Bill 1373 complements the reserve bill by setting detailed standards for handling the digital assets strategic reserve fund managed by the state treasurer.

It defines key terms such as “digital assets,” which include cryptocurrencies, stablecoins, and non-fungible tokens. Lending is also permitted if no additional risk is incurred.

The bill also outlines technical safeguards through definitions of “secure custody solution” and “qualified custodian.” These standards mandate encryption, exclusive key access, and maintenance in multiple secure data centers.

Additionally, multi-party governance, audit protocols, and disaster recovery systems are required to protect public assets held in digital form.

Importantly, SB 1373 ensures continuous appropriation for these funds and exempts them from standard lapse rules. This grants the state treasurer additional flexibility in managing crypto investments, allowing for more responsive financial strategies. 

Arizona’s Bitcoin Legal Tender Bill

While the reserve bills progress, Arizona lawmakers are also considering a separate proposal to designate Bitcoin as legal tender. Introduced by State Senator Wendy Rogers, the bill seeks to allow Bitcoin as an official medium of payment for goods and services in the state.

It has passed one committee and one chamber and is currently awaiting a second committee review. If enacted, Arizona would follow countries like El Salvador and the Central African Republic in recognizing Bitcoin as legal tender.

Other states, including Alabama, Utah, and New Hampshire, are exploring similar digital reserve initiatives.