Arizona Governor Katie Hobbs has made a significant decision by vetoing a proposed law that would have established a state-run Bitcoin and digital assets reserve fund. The bill, known as House Bill 2324, aimed to create a “Digital Assets Reserve Fund” funded by criminal asset forfeiture. However, Governor Hobbs expressed her opposition to the bill in a letter to House Speaker Steve Montenegro on July 1.
In her veto letter, Governor Hobbs raised concerns that the proposed legislation could potentially discourage local law enforcement agencies from collaborating with the state on digital asset forfeitures. She explained that the bill could hinder law enforcement cooperation by removing seized assets from local jurisdictions. Despite the bill initially failing a final vote in the House before being revived and passing a Senate vote, Governor Hobbs ultimately decided to veto it, marking the third time she has rejected a digital asset reserve bill this session.
Governor Hobbs’ decision is in line with her and the Democratic Party’s cautious approach to crypto regulation. While she has not supported positioning Arizona as a hub for digital assets, she has backed targeted measures focused on oversight and consumer protection. Earlier this year, Governor Hobbs signed House Bill 2387, which imposes stricter regulations on crypto ATM operations in the state. She also approved a separate bill, House Bill 2749, allowing for the creation of a digital assets reserve fund under different conditions.
This approach reflects a broader trend among Democratic party members, who have taken a more conservative stance on crypto regulation. For instance, Connecticut recently passed legislation prohibiting state agencies from investing in cryptocurrencies, with unanimous support from the Democratic-majority legislature and Governor Ned Lamont.
On a national level, prominent Democrats like Senator Elizabeth Warren have continued to raise concerns about the risks associated with cryptocurrencies. During discussions on the GENIUS Act, a bill aimed at imposing safeguards on the stablecoin sector, Warren highlighted the near-miss financial disaster caused by the collapse of major crypto firms in 2022, resulting in a $2 trillion market drop.
The ongoing debate underscores the growing partisan differences in crypto policy. Democrats advocate for tighter regulation, while Republicans, including former President Donald Trump, advocate for more open engagement with the industry.
Overall, Governor Hobbs’ veto of the proposed digital assets reserve fund bill showcases her commitment to careful and deliberate regulation of cryptocurrencies in Arizona, aligning with the broader Democratic Party’s approach to crypto regulation.