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As of May 2025, Arizona became the second state in the United States to launch a strategic cryptocurrency reserve fund.
Governor Katie Hobbs signed House Bill 2749 into law, which states that Arizona will not be allowed to directly purchase cryptocurrency assets using taxpayer money. Instead, the reserve will be funded through unclaimed property, airdrops, and staking rewards.
Earlier this month, another US state beat Arizona to the punch. New Hampshire was the first to establish a cryptocurrency reserve fund that lets the state’s treasurer purchase Bitcoin and other tokens with a market capitalization surpassing $500 billion.
Michigan, North Carolina, and Texas have also expressed their interest in integrating cryptocurrency assets into their financial infrastructures. The Texas House of Representatives passed Senate Bill 121, which would introduce the “Texas Strategic Bitcoin Reserve” for the purpose of investing in cryptocurrency. It would also grant investment authority to the comptroller of public accounts over the reserve and certain other state funds. This move brings Texas third in line to introduce a cryptocurrency reserve.
As US states move forward with integrating cryptocurrencies into their state-level fiscal policy, the adoption of crypto reserve funds raises concerns about managing risks, unclear regulations, and the wider impact on the national economy.
Key Takeaways
- Arizona is the second US state to introduce a cryptocurrency reserve fund in 2025.
- Unlike other crypto reserve funds, Arizona’s fund does not rely on taxpayer money and does not allow the government to directly purchase crypto assets. Instead, it is backed by unclaimed property and staking rewards.
- Despite growing interest from other states, like Michigan and Texas, to join the crypto reserve fund club, legal ambiguity around the ownership of digital assets remains a significant barrier to the wider adoption of such funds.
- Market volatility can cause liquidity and cybersecurity problems for states holding some of their reserve funds in crypto.
- If the early crypto reserve funds are successful, other states may emulate them.
- However, widespread adoption relies on regulatory clarity and tangible economic benefits.
Arizona Steps into the Crypto Game
On May 7, 2025, Arizona’s Governor Hobbs signed House Bill 2749, which lets the state establish a cryptocurrency and digital assets reserve fund. Unlike other crypto reserve funds, Arizona’s does not involve state revenue or direct cryptocurrency purchases. Instead, it uses funds from unclaimed property, such as idle bank accounts or uncashed tax returns, to purchase Bitcoin (BTC) or other big digital tokens.
Thus, this new funding mechanism completely avoids the use of taxpayer money. Kyle Lawrence, a partner of Falcon Rappaport & Berkman’s Digital Assets Group, told Techopedia that this can make a difference, especially during periods of economic volatility when allocating public funds to emerging asset classes, like crypto, would likely see strong resistance from the public.
However, Patrick Gruhn, the former head of FTX Europe and Perpetuals US CEO, added that the process also faces several main obstacles amid unclear legislation around ownership rights, asset management duties, and unpredictable market value fluctuations.
Nevertheless, Arizona’s cryptocurrency reserve fund also marks an important milestone in the broader adoption of Web3 and crypto technologies.
Sam MacPherson, co-founder and CEO of Phoenix Labs, told Techopedia:
“If managed effectively, a crypto reserve fund can introduce new forms of liquidity, diversify state-held assets, and potentially provide a hedge against inflation or fiat currency volatility. It also signals the state’s willingness to embrace financial innovation, which could attract blockchain-based businesses, talent, and investment to the state.”
Could This Lead to Mass Adoption?
While Arizona is only the second state in the United States to have a BTC reserve fund, other states have already tried (and failed) to do so or are currently in the process of creating or passing the same legislation.
Lawrence further stated that this was not Arizona’s initial attempt at getting a cryptocurrency reserve bill passed. Previously, the state had the Arizona strategic reserve, which would have invested 10% of state funds in BTC and other assets, but it fell short.
He said:
“It seems as though state governments are going to be wary of using taxpayer funds for such investments, at least for now. Other states have come close as well (Florida, Pennsylvania, Wyoming, to name a few), but have all been rejected and all provided for similar allocation of taxpayer funds. At this juncture, it seems as though using state funds for this isn’t going to work.”
Needless to say, following Arizona’s success, other states will continue to monitor each other’s crypto policies.
Phoenix Labs’ MacPherson added:
“If Arizona’s fund performs well and shows responsible governance, transparency, and effective returns, other states might follow suit. However, widespread adoption will likely depend on federal regulatory clarity and whether this approach proves itself to be politically and financially sustainable.”
Is Holding Volatile Crypto Assets in Reserve Funds a Good Idea?
The idea of holding Bitcoin and other cryptocurrencies in public reserve funds may be forward-thinking, but it induces significant risks. Unlike traditional assets like bonds or fiat currencies, digital currencies are notoriously volatile.
Perpetuals’ Gruhn noted that volatility is the “central concern” because cryptocurrencies can experience double-digit price fluctuations during a single day.
He added:
“Public funds face substantial risks because they are exposed to major fluctuations when used as collateral or backing for public programs. The fund faces three major risks, which include liquidity risk, cybersecurity threats, and reputational risk from underperformance.”
However, this could also see a simple solution through the diversification of held assets as well as robust custody infrastructure and specific guidelines for asset liquidation and rebalancing procedures.
But what happens if the market crashes?
The current stage of the cryptocurrency industry makes a market crash unavoidable, which is why a clear risk framework must back crypto reserve funds.
MacPherson said:
“Ideally, these frameworks have caps on exposure, diversification rules, and a policy playbook for managing downturns. Transparency and regular audits are also essential.”
The Bottom Line
As more states move forward with establishing their own crypto reserve policies, their performance over the next couple of years will set the tone for global mass crypto adoption.
While it is still challenging to predict the economic impact of such reserves, their short-term consequences are very clear. On May 21, 2025, the BTC price reached its all-time high at $111,000.
Lawrence concluded:
“There is obvious upside here if the price of Bitcoin continues on an upward trajectory. If other states, countries, and companies continue to build reserves, it should cause Bitcoin and other digital assets to experience long-term price appreciation (although one never knows what the future holds).”
Whether cryptocurrency reserve funds will succeed or fail could either boost confidence or highlight the risks of relying on highly volatile technologies.
