Michigan Advances Bill to Allow 10 Percent of Funds in Crypto

Michigan has inched closer to potentially holding digital assets in its state reserves. Lawmakers confirmed that House Bill 4087 moved to its second reading on Thursday and has now been referred to the Committee on Government Operations.

Good to Know

• The bill allows Michigan’s treasurer to invest up to 10% of stabilization funds in crypto.
• Custody must follow strict security rules including exclusive government control of keys.
• Michigan joins Massachusetts and Ohio with similar bills at the committee stage.

Introduced back in February by Representatives Bryan Posthumus and Ron Robinson, the measure amends the Michigan Management and Budget Act to let the state treasurer allocate up to 10% of its “countercyclical budget” and “economic stabilization fund” into cryptocurrency.

While the text does not specifically name Bitcoin, it defines eligible assets broadly as digital currencies secured by encryption, operating independently of a central bank. That leaves the door open for Bitcoin, Ethereum, and other decentralized tokens.

The legislation also permits the state to loan out its crypto holdings in order to generate returns, provided that it does not introduce additional financial risk.

Security and Custody Requirements

The bill outlines strict conditions for storage:

1. Assets must be kept with a qualified custodian such as a bank, trust company, or regulated firm, or in an exchange-traded product registered with U.S. regulators.
2. Custody solutions must guarantee exclusive control of private keys by the state.
3. Additional requirements include end-to-end encryption, no smartphone-based access, geographically diversified data centers, multi-party transaction authorization, and frequent audits.

These safeguards are designed to address the risks that come with public entities holding digital assets.

If the bill passes, Michigan would join a small but growing group of U.S. states exploring crypto as part of their fiscal strategy. New Hampshire, Arizona, and Texas already have laws permitting state treasurers to hold Bitcoin or other crypto assets.

Meanwhile, attempts in Montana, Connecticut, North Dakota, South Dakota, Wyoming, and Pennsylvania have failed. Beyond those, 17 other states currently have pending proposals on crypto reserves, according to Bitcoin Reserve Monitor, like Illinois, Georgia and Utah.

Michigan now joins Massachusetts and Ohio in moving bills through the committee process, underscoring the growing interest at the state level even as federal policy remains unsettled.

A New Impulse for the Bitcoin Reserve Discussion for U.S. States

The debate comes at a time when state-level initiatives have slowed after a flurry of Bitcoin reserve bills in 2023 and 2024. Michigan’s move reignites the discussion, particularly with fiscal stabilization funds potentially being diversified into digital assets.

Advocates argue that limited exposure—such as the proposed 10% cap—could provide upside potential without overwhelming risk, while critics warn of volatility and custody challenges. For Michigan, the bill’s detailed security language is meant to ease those concerns.