Kentucky Governor Approves Bill Protecting Bitcoin Self-Custody Rights

Kentucky Passes Landmark Cryptocurrency Self-Custody Law as More States Consider Digital Asset Adoption

  • Kentucky has unanimously passed House Bill 701, providing legal protections for self-custody cryptocurrency holders.
  • The law clarifies that mining and staking rewards are not securities and exempts node operators from money transmitter regulations.
  • Kentucky joins a growing trend of U.S. states exploring cryptocurrency integration into public funds, with 19 states currently considering legislation.

Kentucky has unanimously enacted legislation safeguarding cryptocurrency self-custody rights, positioning the state among a growing number of U.S. jurisdictions embracing digital assets. Governor Andy Beshear signed House Bill 701 on Thursday after it received overwhelming support in both legislative chambers—passing 91-0 in the House and 37-0 in the Senate.

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The landmark legislation guarantees Kentucky residents the right to maintain complete control over their cryptocurrencies through self-custody—a practice where users independently manage the private keys needed to authorize transactions rather than relying on third-party exchanges or services. Similar to holding physical cash rather than bank deposits, self-custody gives users full autonomy over their digital assets.

While self-custody offers independence, it places complete responsibility on users to protect their holdings. This reality was highlighted by a cautionary tale from Wales, where one individual has spent 12 years attempting to excavate a landfill to recover a hard drive containing Bitcoin worth approximately $696 million at current market rates.

The new Kentucky law provides several key protections for cryptocurrency users and businesses:

1. Guarantees the right to hold and manage cryptocurrencies in self-hosted wallets
2. Prevents local governments from implementing discriminatory regulations against crypto mining operations
3. Explicitly states that mining and staking rewards are not classified as securities
4. Exempts blockchain node operators and staking activities from Kentucky’s money transmitter regulations

Kentucky lawmakers are also considering additional cryptocurrency legislation. House Bill 376 proposes creating a state crypto reserve that would permit investment of up to 10% of excess state funds into digital assets with market capitalizations exceeding $750 billion.

## Other states considering Bitcoin reserves

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Kentucky’s legislative action reflects a broader national trend toward cryptocurrency adoption. Currently, one-third of U.S. states are exploring cryptocurrency integration for public funds, with 19 states actively considering relevant legislation.

Utah recently enacted legislation authorizing its state treasurer to allocate up to 5% of certain public funds to “qualifying digital assets” with market capitalizations above $500 billion (averaged over 12 months).

Similarly, New Mexico has shown support for Bitcoin with Senator Anthony L. Thornton introducing the Strategic Bitcoin Reserve Act (SB275) in February, which proposes allocating 5% of public funds to Bitcoin.

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The Bitcoin Reserve Monitor currently tracks 16 states actively pursuing cryptocurrency legislation. However, it’s important to note that most proposed state investments are capped at 10% of reserves, and the majority of states have not yet pursued cryptocurrency initiatives.

Several states have already rejected proposals to convert tax dollars into Bitcoin, including Montana, North Dakota, Wyoming, and Pennsylvania.

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