Essential Insights
- South Carolina has introduced a legislative proposal permitting state investments in Bitcoin and other digital assets, with a limit of one million Bitcoins.
- The legislation requires secure custody, transparency, and routine audits of the state’s digital asset holdings.
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On Thursday, lawmakers in South Carolina unveiled the “Strategic Digital Assets Reserve Act,” legislation that empowers the state treasurer to invest in Bitcoin and other digital assets up to defined limits.
The bill, identified as H4256, allows the state treasurer to allocate unspent funds from the General Fund, Budget Stabilization Reserve Fund, and other state-managed investment resources towards digital assets.
Investment is restricted to a maximum of 10% of total managed funds, with a cap on Bitcoin reserves of one million Bitcoins.
According to the proposed law, digital assets must be stored either directly by the state treasurer through secure custodial methods, by a qualified custodian, or via exchange-traded products provided by regulated financial institutions. The bill explicitly prohibits lending of digital assets.
“Bitcoin, as a decentralized digital asset, and other digital assets offer unique properties that can act as a hedge against inflation and economic volatility. It also helps to diversify the state’s funds,” the bill articulates.
The legislation stipulates that digital asset holdings and their equivalent US dollar value must be reported biennially.
To ensure transparency, all public addresses of digital assets must be listed on an official state website. Additionally, the state treasurer is required to implement routine independent assessments and audits of digital asset management systems.
Furthermore, the bill permits residents of South Carolina to contribute digital assets to the reserve through a sanctioned vendor process. If passed, the legislation would be in effect until September 1, 2035.
With this initiative, South Carolina aligns itself with a growing number of US states deliberating the establishment of strategic crypto reserves. Currently, 24 out of 50 US states have tabled Bitcoin reserve proposals, as reported by Bitcoin Law.
Before H4256, legislators in South Carolina had introduced S0163, a bill aimed at regulating digital assets. This bill seeks to prevent government agencies from mandating or accepting payments in central bank digital currency (CBDC).
It would also enable transactions using digital assets free from specific taxes related to crypto mining or zoning restrictions.
Additionally, S0163 addressed concerns regarding cryptocurrency mining, such as energy consumption and noise, while also aiming to foster rural development through mining activities.
