Arizona reconsiders Bitcoin reserve plan using forfeited digital assets

Arizona lawmakers have voted to revive a bill that would expand the state’s forfeiture laws to include digital assets and establish a new Bitcoin reserve fund.

Following a June 19 motion in the Senate, House Bill 2324 is headed back to the Arizona House of Representatives for reconsideration. 

The measure, which had previously failed to pass the House on May 7, was brought back after a narrow 16-14 Senate vote. 

Republican Senator Janae Shamp, one of the lawmakers who initially voted against the bill, filed the motion to reconsider. 

It must now secure a majority vote from the 60-member House, where Republicans hold 33 seats, after which it will proceed to Governor Katie Hobbs’ desk for potential approval.

What is HB 2324?

HB 2324 proposes the creation of a “Bitcoin and Digital Assets Reserve Fund” to manage assets seized through criminal forfeiture. It updates Arizona’s existing forfeiture laws to formally include digital assets such as cryptocurrencies, expanding legal definitions to cover virtual currencies and other digital-only items with economic value.

The bill outlines new procedures for law enforcement agencies to seize, access, and store digital assets, including requirements to use secure, state-approved digital wallets.

Under the proposed allocation system, the first $300,000 worth of forfeited digital assets would be directed to the Attorney General’s office. Any remaining value would be split, 50% to the Attorney General, 25% to the state’s general fund, and 25% to the newly established reserve fund.

HB 2324 also clarifies regulations governing property forfeiture by adding protections for innocent owners and establishing limits on when other property types, such as vehicles, may be seized. 

Supporters of the bill argue the changes are needed to keep pace with the growing role of digital assets in criminal investigations and economic activity.

HB 2324 differs significantly from House Bill 2749, which Governor Hobbs signed into law on the same day the former was initially rejected.

HB 2749 allows the state to claim digital assets that have remained unclaimed for at least three years. These assets must be transferred to the Arizona Department of Revenue in their original digital form.

Unlike HB 2324, HB 2749 does not deal with criminal forfeiture or law enforcement procedures. Instead, it establishes a regulatory process for identifying and managing abandoned assets, along with a reserve fund that may receive staking rewards or airdrops. 

Importantly, HB 2749 prohibits the use of taxpayer money, focusing only on assets already in state possession due to abandonment.

Both bills involve the creation of a “Bitcoin and Digital Assets Reserve Fund,” but the funding mechanisms and purposes differ. 

HB 2749’s fund is sourced from unclaimed property and is subject to legislative appropriation, while HB 2324’s version is tied to seized assets from criminal proceedings.

Arizona is not the only state taking steps toward integrating digital assets into public finance. Earlier this year, New Hampshire passed House Bill 302, becoming the first U.S. state to authorize its treasurer to invest up to 10% of public funds in Bitcoin and other qualifying digital assets with a market cap of over $500 billion.