Michigan has moved the bill HB 4087 to second reading, which could put the state on the path to creating a cryptocurrency reserve. The proposal would allow the Treasurer to allocate up to 10% of the General Fund and the Economic Stabilization Fund to digital assets. Backed by Republican representatives, it was referred to the Committee on Government Operations due to implications for custody, risk, governance, and compliance.
Content and Measures of the Bill
The bill authorizes three forms of holding: a secure custody under government control, a qualified custodian such as a bank or trust, or exchange-traded products managed by registered investment companies. It requires robust technical security measures, including exclusive control of private keys by the government, end-to-end encryption, prohibition of smartphone access, geographically diversified data centers, multi-party authorizations for transactions, and regular audits.
HB 4087 also allows limited lending of digital assets as long as it does not increase financial risk, and mandates that taxes or fees collected in cryptocurrency must be converted to dollars for budgetary purposes. After seven months of inactivity, the proposal joins state frameworks already approved in New Hampshire, Arizona, and Texas, though only Texas has implemented fund allocations. Full state adoption could drive up to $23 billion in Bitcoin purchases.
Implications and Debate
The progress of HB 4087 opens concrete decisions for product and compliance, including the selection of custodians, defining technical security requirements, exposure limits, and clear rules for converting tax revenues. Among the points of tension, the broad definition of “digital currency” could allow exposure to lower-cap tokens, increasing the debate over eligible assets and volatility.
At the same time, strict technical controls raise operational costs but reduce the risk of loss or unauthorized access, aligning management with institutional security standards. If more states adopt similar frameworks, institutional demand could increase. However, the requirement to convert crypto revenues to USD introduces additional tax and reporting burdens, requiring stronger accounting and control processes.
“THERE IS NO MARKET CAPITALIZATION LIMIT IN THE LEGISLATION THAT PREVENTS THE STATE FROM BUYING CRYPTOCURRENCIES OTHER THAN BITCOIN,”
warned the Michigan Bitcoin Trade Council, highlighting the risks of buying centralized and higher-risk assets. A qualified custodian is understood as an authorized entity, such as a bank or trust, that holds and protects digital assets on behalf of the owner.
The next milestone will be the review and vote in the Committee on Government Operations, which will determine whether HB 4087 reaches the full House and sets the roadmap for any state allocation in digital assets.
