HB 1695

This bill authorizes the treasurer to invest funds from the following in bitcoin:  The general fund.  The revenue fluctuation reserve.  Any other state fund the general assembly expressly designates. However, this bill prohibits the market value of bitcoin held in or for each fund listed above from, at the time of purchase, exceeding 10% of that fund's total assets. No more than 5% may be acquired in any single fiscal year until the ten-percent ceil ing is reached. However, passive appreciation above the cap does not require divestment unless otherwise directed by the state treasurer. This bill requires bitcoin acquired under this bill to be held (i) directly by the state through a secure custody solution, (ii) on the state's behalf by a qualified custodian, or (iii) in the form of an exchange-traded product. Such position must be ag gregated with direct holdings when applying the cap as described above. However, this bill does not authorize public funds to be invested in a digital asset, digital commodity, or cryptocurrency other than bitcoin. As used in this bill, a "qualified custodian"" means a federal- or state-chartered bank, trust company, special-purpose depository institution, or other regulated financial institution authorized to be a custodian of digital assets, and a ""secure custody solution"" means a technological product or a blended product-and-service that does all of the following:  Stores private cryptographic keys exclusively in encrypted, non-network-connected hardware located in at least two geographically distinct, secure facilities.  Makes such keys accessible only through end-to-end-encrypted channels and never via a smartphone.  Enforces multi-party governance for transaction authorization, implements role-based access controls, and records immutable audit logs of user actions.  Is subject to an annual third-party code review and penetration test, with remediation of any discovered vulnerabilities.  Maintains and periodically tests a disaster-recovery plan that ensures continued access to the state's assets if the service provider becomes unavailable. WRITTEN PROCEDURES This bill requires the state treasurer to adopt written procedures for a secure custody solution governing key generation, storage, transaction authorization, incident response, and continuity of operations. The treasurer must ensure that any qualified custodian engaged under this bill (i) is subject to ongoing supervision by its primary banking regulator; (ii) provides the state with a copy of its most recent system and organization controls (SOC) 2 Type II report; and (iii) maintains insurance coverag e in an amount commensurate with assets under custody. A single private individual or private entity must not hold or control a complete private key or key shard that enables unilateral transfer of state-owned bitcoin. No later than July 1, 2028, this bill requires the treasurer to design, implement, and maintain an internal self-custody procedure that complies with the procedures above. Once operational, the treasurer must hold no less than 10% of the aggregate bitcoi n owned by the state through such self-custody procedure. REPORTS On or before October 1 of each even-numbered year, this bill requires the treasurer to publish on the treasurer's public website and transmit to legislative committees having jurisdiction over finance-related matters a report detailing all of the followi ng:  The quantity of bitcoin held on the final business day of the preceding fiscal biennium.  The United States-dollar equivalent of such holdings on that day and at acquisition.  A summary of purchases, sales, and transfers since the prior report.  Any realized gains or income produced by the holdings.  A cryptographic proof, or a signed message from 1 or more reserve addresses, sufficient for third parties to verify on-chain balances reported above. This bill requires the treasurer to make available, upon request, any independent security-assessment executive summaries related to the secure custody solution, redacted as necessary for security. BITCOIN AS PAYMENT This bill authorizes the treasurer to establish a program to accept bitcoin in payment of state taxes, fees, or other obligations. Any bitcoin so received must be transferred to the general fund and recorded at prevailing market value. The collecting d epartment or agency must be reimbursed or credited in United States-dollar funds for the amount recorded. However, participation by a taxpayer or payor in such a program is voluntary, and this paragraph does not require acceptance of bitcoin by any depar tm ent or agency. PERFORMANCE EVALUATION This bill requires the treasurer to submit a comprehensive evaluation of the bitcoin reserve's performance and risk profile to the general assembly on or before October 1, 2032. Upon receipt of the report, the legislative committees having jurisdiction over finance-related matters must review the findings and may recommend continuation, revision, or repeal of this bill. POLICY STATEMENT On or before January 1, 2027, this bill requires the treasurer to file with the state funding board an investment-policy statement governing bitcoin allocations, including risk-management metrics and rebalancing guidelines. RULEMAKING This bill authorizes the treasurer to promulgate rules to implement this bill."