North Carolina Proposes 10% State Fund Investment in Bitcoin ETFs

TLDR:

North Carolina bill proposes investing up to 10% of state funds in Bitcoin ETFs, potentially worth over $10 billion
The bill requires qualifying digital assets to have a $750 billion market cap – currently only Bitcoin meets this criterion
North Carolina becomes the 20th US state to introduce Bitcoin reserve legislation
Montana, Florida, Maryland, Iowa, and Kentucky have recently filed similar bills
State investments must be made through regulated exchange-traded products with qualified custodians

North Carolina lawmakers have introduced legislation that would allow the state to invest up to 10% of its public funds in Bitcoin exchange-traded products (ETPs), joining a growing movement of states considering cryptocurrency investments.

The bill, filed on Monday by Representative Destin Hall along with Representatives Mark Brody and Steve Ross, could enable the State Treasurer to invest more than $10 billion in Bitcoin-based funds. This includes money from North Carolina’s General Fund, Highway Fund, and 24 special funds under state supervision.

Under the proposed legislation, qualifying digital assets must maintain a market capitalization of at least $750 billion over the previous twelve months. Currently, Bitcoin is the only cryptocurrency that meets this requirement, with its closest competitor, Ethereum, having a market cap of approximately $323 million.

The bill establishes clear guidelines for investment management. Third-party investment managers handling digital assets must have at least $100 million in assets under management. These managers would need to provide annual audited financial statements to the State Treasurer, unless waived after a cost-benefit analysis.

A Growing Movement

North Carolina has become the twentieth US state to introduce Bitcoin reserve legislation, marking a wave of similar proposals across the country. Last week alone, Montana and Florida added their names to the growing list of states integrating digital assets into their financial strategies.

In Montana, House Bill 429 proposes creating a special revenue account for investments in precious metals, stablecoins, and digital assets. The state could allocate up to $50 million from its general fund for these investments, with similar requirements for market capitalization and qualified custodians.

Florida’s proposal takes a different approach, positioning Bitcoin as a hedge against inflation. Their bill would authorize the state’s Chief Financial Officer to invest up to 10% of public funds in Bitcoin and allow state agencies to accept Bitcoin payments, though these would need to be converted to US dollars for general revenue fund contributions.

Kentucky’s House Bill 376, introduced by Representative TJ Roberts, mirrors North Carolina’s 10% investment cap on excess state funds. The Kentucky bill also includes provisions for digital asset payments while taking a stance against central bank digital currencies (CBDCs).

Maryland has taken a unique approach with House Bill 1389, proposed by Representative Caylin Young. The bill would establish a Maryland Bitcoin Reserve Fund, funded specifically by gambling violation penalties.

Iowa’s contribution to this trend comes through House File 246, introduced by Representative Taylor Collins. The legislation would permit the State Treasurer to invest in Bitcoin, stablecoins, and precious metals, with a more conservative 5% cap on public fund allocations.

North Carolina’s history with cryptocurrency legislation shows mixed reactions. In 2023, the state’s House of Representatives passed a bill prohibiting government bodies from accepting CBDCs, aligning with privacy advocates and crypto supporters.

However, some resistance exists within the state. Last year, lawmakers proposed stricter regulations on digital asset mining in Henderson, Polk, and Rutherford Counties, according to NC Newsline.

The current bill provides flexibility in investment approaches. The State Treasurer could choose between direct investment in Bitcoin exchange-traded products or indirect third-party investment management arrangements, both within and outside the United States.

The Governor and Council of State would oversee the implementation of digital asset investments, ensuring proper management and accountability of public funds.

This legislation comes at a time when Bitcoin’s price continues to reach new heights since Election Day, prompting increased interest from state governments in cryptocurrency investments.

Montana, Maryland, and Kentucky filed their Bitcoin investment bills just last week, showing the rapid pace of cryptocurrency adoption at the state level.