According to the latest reports, Michigan’s legislature is moving House Bill 4087, the Strategic Crypto Reserve bill, which would allow the state to invest up to 10% of certain public funds in cryptocurrency. It has had its second reading and is now in the Committee on Government Operations.
The Michigan Crypto Reserve Bill proposes amending the Michigan Management and Budget Act to allow investment of funds from the countercyclical budget and the economic stabilization fund into digital assets under defined security, custody, and oversight conditions.
It doesn’t mention Bitcoin specifically but sets up a framework for holding digital currency, including custody via qualified custodians or registered investment products and strict technical security requirements.
What HB 4087 Proposes and How It Works
HB 4087 would allow Michigan’s state treasurer to use up to 10% of funds from the countercyclical budget and the economic stabilization fund to invest in “digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, and that operates independently of a central bank.”
It requires digital assets to be held via one of three approved methods: through a secure custody solution; via qualified custodians such as a bank, trust company or state-regulated entity; or by using exchange-traded products from registered investment companies.
It includes rules for custody, such as exclusive control of private keys by the government, no smartphone access, end-to-end encryption, geographically diversified secure data centers, multiparty transaction authorization, and regular security audits.
It also allows cryptocurrency to be loaned out to generate returns as long as it doesn’t increase financial risk. The introduction of this bill was made by Representatives Bryan Posthumus and Ron Robinson.
Michigan already has some exposure via Bitcoin ETFs held by its pension fund so they’re already somewhat prepared for digital asset allocation.
Also read: Breaking: Texas Just Voted for Bitcoin, Is a State-Run Crypto Reserve Coming Next?
Legal and Security Conditions in the Bill
The Michigan crypto reserve bill, however, has several security and regulatory requirements. Custody solutions must have exclusive governmental control of private keys and no unauthorized access. The bill requires encryption and hardware security, no smartphone access, data centers in multiple locations, multiparty transaction authorization, and regular audits.
These technical requirements are to protect public funds from theft or loss. It also requires digital assets to be held through entities regulated by banking, trust or registered investment company.
Legal language also requires amendment to existing budget acts (Michigan Management and Budget Act) to add a new section for “strategic crypto reserve” and specify eligible funds.
Opposition and Risk Factors
Some groups, including the Michigan Bitcoin Trade Council, oppose HB 4087 because it doesn’t have a market cap threshold to limit the state to only the most established assets. Their concern is that lesser-known or centralized cryptocurrencies are too risky.
Critics generally say price volatility is a big risk for public monies, and what assurances are there that state financial risk is acceptable?
Also read: U.S. Bitcoin Strategic Reserve Bill Moves Forward as Congress Meets Industry Leaders
Conclusion
Based on the latest research, the Michigan crypto reserve bill is a bold and well-crafted attempt to put cryptocurrency into state public finance policy through a reserve mechanism.
Allowing up to 10% of selected funds into digital assets under prescribed custody, oversight and security conditions reflects growing interest in crypto among state governments and increased maturity in regulatory and custody practices.
While there are many hurdles to clear, the bill moving forward is a sign of how public reserves may be managed going forward.
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Summary
Michigan is moving a strategic crypto reserve bill (HB 4087) that would allow up to 10% of certain public funds to be invested in digital currency, under strict custody, regulatory and security requirements. The bill allows approved custody methods, lending only under constrained risk and specified security measures.
Glossary
Strategic Crypto Reserve: a fund or allocation by a government entity to hold digital assets as part of its financial reserves.
Countercyclical Budget: funds set aside by governments to buffer economic downturns, used when revenues fall.
Economic Stabilization Fund: a government fund designed to stabilize finances in volatile economic conditions.
Custodian / qualified custodian: regulated entity (bank, trust company, etc.) responsible for securely holding assets on behalf of others.
Private key control: cryptographic control over ownership of a digital asset, where only designated persons or entities hold access.
Digital currency: a currency that uses encryption and operates independently of a central bank; may include cryptocurrencies.
Frequently Asked Questions About Michigan Crypto Reserve Bill
What does “up to 10% of funds” mean under HB 4087?
It means funds in Michigan’s countercyclical budget and economic stabilization fund. Not all state funds or pensions.
Does the bill mention Bitcoin specifically?
No. The bill refers to “digital currency” meeting defined encryption and operational criteria; not just Bitcoin.
How will the state hold the crypto assets?
Assets must be held via a secure custody solution, qualified custodian or registered investment products.
What’s next for this Michigan Crypto Reserve Bill?
HB 4087 has moved to 2nd reading and has been referred to Government Operations. It will be debated, possibly amended and must pass House, Senate and be signed into law.
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