In a move that diverges from many other U.S. states, Connecticut has passed a new law that bars state and local governments from investing in bitcoin or any other digital currency.
The bill, HB7082, passed unanimously in both the House and Senate with zero opposing votes.
The law, officially titled “An Act Concerning the Regulation of Virtual Currency and State Investments,” was signed into law recently and is causing a stir in the Bitcoin and financial communities.
HB7082 prohibits the state of Connecticut and its political subdivisions from accepting, holding or investing in digital currencies. This includes bitcoin, ethereum and other digital assets. It also bars the state from creating a bitcoin reserve, a concept being explored by other states.
The law goes further by imposing strict rules on digital asset businesses operating in the state. These rules enforce anti-money laundering (AML) compliance and parental consent verification for digital asset users under 18.
It also requires 1:1 reserve requirements for bitcoin custodians.
Businesses that handle Bitcoin transactions must now provide users with clear information about risks and fees and provide receipts with full transaction details.
No business can let a minor use a money-sharing app without first getting proof of consent from a parent or guardian.
Lawmakers in Connecticut say it’s about protecting public funds and minimizing financial risk. They say Connecticut’s new law bars state investments in bitcoin to protect its financial assets from market risk.
Supporters argue that the high volatility of bitcoin makes it a risky investment for public money like pension funds and state reserves.
The law also looks to bring bitcoin businesses under tighter control, to make them follow the same rules as the traditional financial system.
While Connecticut is cracking down on digital assets, other states are going the other way.
States like Texas, New Hampshire and Arizona have already passed laws or proposed bills to create a bitcoin reserve, which allows public funds to be invested in bitcoin.
Texas has even described bitcoin as a “forward-thinking investment opportunity” and a long-term store of value.
The new law has caused mixed reactions in the financial world. Some think it’s too cautious, others think it’s part of a bigger plan.
Matt Hougan, CIO of Bitwise, responded with sarcasm, “The hedge fund managers got so upset they couldn’t beat Bitcoin…”
Some states like Florida, South Dakota and Oklahoma have either killed or vetoed Bitcoin bills this year. Others like Louisiana are still exploring the tech. Louisiana just announced it would create a special committee to study AI, blockchain and digital assets.
