Connecticut Passes Strictest Crypto Ban on State, Local Governments

Connecticut Enacts Nation’s Strictest Crypto Law, Bans Government Involvement and Mandates Strong Consumer Protections

  • Connecticut has enacted the strictest crypto legislation in the U.S., banning government entities from investing in or accepting virtual currencies.
  • The law requires crypto businesses to issue clear fraud risk warnings and disclose all major risks to consumers.
  • Money transmission rules in Connecticut now include expanded definitions for digital wallets and related terms.
  • Connecticut’s approach differs from the national trend, as many states consider or adopt Bitcoin reserve policies.
  • Other states, like New Hampshire and Arizona, have taken steps in the opposite direction, starting strategic Bitcoin reserve initiatives.

The state of Connecticut has passed the most restrictive crypto law in the United States. On Tuesday, the General Assembly approved legislation that bars all state and local governments from purchasing, holding, or investing in virtual currencies. The law also prohibits using crypto to pay any amount due to public agencies.

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The new law, which passed unanimously, requires crypto businesses to display strong fraud warnings and to explain all material risks to users. It amends money transmission statutes to include new definitions for digital wallets, control persons, and kiosks.

State officials said the legislation is intended to protect consumers and the public treasury. The law orders crypto service providers to present a visible notice stating: “LOSSES DUE TO FRAUDULENT OR ACCIDENTAL TRANSACTIONS MAY NOT BE RECOVERABLE AND TRANSACTIONS IN VIRTUAL CURRENCY ARE IRREVERSIBLE.” Additional sections require verification steps for users under 18 and comprehensive disclosures for all virtual currency transactions.

The law also introduces new compliance requirements for state-licensed firms dealing with digital assets. These measures expand Connecticut’s oversight of firms that transmit funds electronically.

Connecticut’s move stands out at the national level. While 31 Bitcoin reserve bills are under discussion in 16 other states, the state has taken a stricter approach. In contrast, states such as New Hampshire and Arizona have implemented or considered plans to hold Bitcoin as a reserve asset. As of last month, New Hampshire created a state Bitcoin reserve and Arizona adopted similar measures for certain government funds.

The Connecticut legislation blocks any future digital asset initiatives by public entities, limiting their participation in the sector. According to crypto policy tracker Bitcoin Laws, several states plan to revisit reserve proposals in the future even after initial rejections.

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