Will States Implement Their Own Regulations for Cryptocurrency and Virtual Currencies?

There has been a notable transformation in the realm of cryptocurrencies and virtual currencies. Federal initiatives such as the strategic bitcoin reserve have garnered significant attention, but how are states approaching crypto regulation?

Federal Reserve

In March, President Trump signed an executive order to establish a strategic bitcoin reserve along with a digital asset stockpile that comprises Solana (SOL), Ether (ETH), XRP, and Cardano. This announcement had an immediate effect on Bitcoin (BTC) and Solana prices. The bitcoin reserve repurposed approximately 200,000 bitcoins that were confiscated through criminal and civil proceedings. Trump’s crypto czar, David Sacks, indicated that the government had previously sold off about 195,000 bitcoins over the past decade. While these coins generated $366 million at the time, they would be valued at around $17 billion today if retained.

Mainstream Growth of Crypto

Even before the establishment of the reserve, cryptocurrency was gaining traction in mainstream finance and among consumers. Bitcoin and Ethereum became widely accepted payment methods in e-commerce and travel sectors. Major retailers began integrating crypto wallets and transaction tools as early as 2021. Furthermore, the gaming and gambling industries also welcomed crypto. Numerous online casinos accept Bitcoin and other digital currencies for both deposits and withdrawals. This trend highlights a crucial difference in gambling practices—the distinction between sweepstakes casinos and traditional online casinos. Conventional online casinos typically accept cryptocurrency, whereas sweepstake casinos utilize virtual currencies to simulate gambling, which often aren’t convertible to real money. Despite their volatility, Bitcoin and Solana maintain real-world monetary value.

State-Level Regulation

In spite of federal initiatives, state governments are devising their own regulations. Britannica Money notes that the landscape for U.S. cryptocurrency regulation is “not well defined.” Different federal agencies and lawmakers assess digital assets in diverse ways, allowing states to create their own rules. The Securities and Exchange Commission (SEC) regards cryptocurrencies as securities and is focused on investor protection, requiring any investment contract to be formally registered.

Conversely, the Commodity Futures Trading Commission (CFTC) considers cryptocurrencies as commodities akin to oil and gold. This agency regulates a market for crypto futures and has launched enforcement actions against unregistered Bitcoin futures exchanges (as per Britannica). Additionally, the IRS classifies cryptocurrencies as property, meaning that transactions involving crypto may be subject to taxation.

Following the government’s announcement of a reserve, state-level interest in regulation has surged. While the federal initiative set the tone, individual states have reacted in various ways. Wyoming, for example, has adopted a strong pro-crypto stance, with the governor announcing plans for the state to issue its own stablecoin by late March. In May, Arizona became the second state, after New Hampshire, to create its own strategic bitcoin reserve.

Should the Reserve Have Only Included Bitcoin?

Critics of the government’s stockpiling argue that the inclusion of cryptocurrencies other than Bitcoin “makes little sense” and could distort the market (according to Investopedia). The reserve features Solana (SOL), with blockchain co-founder Anatoly Yakovenko expressing his disapproval. He posted on X stating that his preference would be for “No reserve” and asserted that if one aims for decentralization’s failure, they would “put the government in charge of it.” His second preference involves states managing their own reserve as a safeguard against federal errors. Lastly, he suggested a reserve where the included coins could be “rationally justified,” even if that meant restricting it to Bitcoin alone.

Last Word

The federal reserve has already had a considerable influence on the crypto landscape. With Bitcoin once again surpassing $100,000 and state-level strategies evolving, the U.S. is transitioning toward multi-tiered regulation. Federal stockpiling has signified legitimacy, yet local policies will likely determine access, innovation, and risk. This fragmentation could either foster resilience or breed confusion, depending on the clarity and coordination that lie ahead.

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