Kentucky Enacts Law for Bitcoin and Ethereum Self-Custody

Kentucky Governor Andy Beshear signed House Bill 701 yesterday, providing enhanced protections for individuals who self-custody their Bitcoin and other cryptocurrencies.

Self-custodying Bitcoin or other cryptocurrencies means that users maintain complete control over the private keys required to authorize transactions. This approach resembles holding cash in a physical wallet rather than using a debit card to instruct your bank to transfer funds.

Users who value this autonomy also bear full responsibility for safeguarding their assets. For instance, a man in Wales has dedicated 12 years to securing permission to dig through a landfill to recover a hard drive containing 8,000 Bitcoin, valued at $696 million based on current pricing.

If users are willing to accept such risks, Kentucky aims to protect their rights.

Importantly, the new law passed with unanimous backing, recorded at a vote of 91-0 in the House on February 28, and 37-0 in the Senate on March 13, before receiving gubernatorial approval.

The legislation guarantees individuals the right to hold and manage cryptocurrencies within their self-hosted wallets, allowing Kentucky residents to exercise full control over their digital assets without facing interference.

Consequently, this prevents local governments from instituting discriminatory regulations that unjustly target crypto mining operations.

Furthermore, the law clarifies that neither mining nor staking rewards will be deemed securities, and activities related to operating blockchain nodes and staking will be exempt from Kentucky’s money transmitter laws.

Additionally, Kentucky is considering House Bill 376, which aims to establish a crypto reserve for the state, permitting investments of up to 10% of surplus state reserves in digital assets with a market capitalization of $750 billion.

Other states considering Bitcoin reserves

This new legislation in Kentucky emerges as numerous states are increasingly embracing cryptocurrency.

Currently, a third of states are investigating options for utilizing crypto in public funds, with 19 states actively engaging in legislative discussions.

For instance, Utah recently approved a bill on January 28 that permits the state treasurer to allocate up to 5% of certain public funds to “qualifying digital assets,” provided they maintain an average market capitalization of over $500 billion over the last 12 months.

In another example of Bitcoin advocacy, New Mexico’s Senator Anthony L. Thornton introduced the Strategic Bitcoin Reserve Act (SB275) on February 4, proposing a 5% allocation of public funds specifically to Bitcoin.

As of the time of writing, 16 states are actively monitored by the Bitcoin Reserve Monitor.

While interest is evident, most proposals are limited to a 10% cap, and the majority of states have yet to explore cryptocurrency at this point.

Additionally, several states—such as Montana, North Dakota, Wyoming, and Pennsylvania—have already dismissed efforts to convert tax revenue into Bitcoin.

Edited by Stacy Elliott.