Michigan First Steps Towards Strategic Crypto Reserve

Michigan has taken a significant step in cryptocurrency policy by proposing the creation of a strategic Bitcoin reserve. On February 13, 2025, Representatives Bryan Posthumus and Ron Robinson introduced HB 4087, which aims to amend the state’s Management and Budget Act of 1984 to allow the establishment of a Bitcoin reserve using funds from the state’s general and economic stabilization accounts.

Creation and Purpose of the Fund

The bill reinforces a countercyclical budget and economic stabilization fund to help stabilize revenue and employment during periods of economic downturns and high unemployment rates. This fund acts as a financial buffer to smooth out the volatility of government revenues during economic fluctuations.

Cryptocurrency Investment

A significant addition to the bill, HB 4087, is the permission for the state treasurer to invest in cryptocurrencies. The allowable funds for such investments include the General Fund and the newly created countercyclical budget and economic stabilization fund. However, investments in cryptocurrencies are capped at 10% of the available funds from each mentioned fund. This limitation is a measure likely designed to manage risk while acknowledging the growing role of digital currencies in financial strategies. The state can hold these assets through secure custody solutions or ETF products from registered investment companies. Additionally, the bill allows the state to generate additional revenue through cryptocurrency lending. 

Management of Cryptocurrency

The bill outlines specific guidelines for handling cryptocurrency investments:

• Direct Holding: Cryptocurrency must be held directly by the state treasurer.

• Storage Solution: Options include secure custody solutions, qualified custodians, or exchange-traded products regulated by appropriate federal bodies.

• Loan of Cryptocurrency: The state treasurer is permitted to loan out cryptocurrency if it can be done without increasing financial risks.

Tax and Fee Transactions in Cryptocurrency

Should taxes or fees be paid to the state in cryptocurrency, these are to be transferred to the General Fund. However, if these payments were meant for other designated funds, the bill requires reimbursement to those funds from the General Fund in traditional money.

Definitions and Security Measures

The bill clarifies definitions crucial to its implementation:

• Cryptocurrency is defined as a digital currency that uses encryption techniques for unit generation and transaction verification, operating without central bank oversight.

• Secure Custody Solution and Qualified Custodian definitions provide a framework for how cryptocurrency should be securely managed and stored.

Security Protocols

To ensure the security of the cryptocurrency holdings, the bill mandates specific security features:

• Cryptographic private keys must be securely known only to specific governmental entities, housed in encrypted environments, and managed away from easily compromised devices such as smartphones.

•  The hardware storing these keys must be kept in secure data centers with geographical diversity.

• A robust governance structure must be in place for transaction authorization, along with stringent audits and penetration testing to address any vulnerabilities quickly.
  

House Bill No. 4087 represents a forward-thinking approach by integrating cryptocurrency into state-level financial management, while also setting strict guidelines to manage and safeguard these digital assets.  The bill aims to utilize modern financial tools to enhance the state's ability to manage its finances especially during economic challenges, reflecting an adaptation to the evolving nature of global economics and technology.

Representative Posthumus, an outspoken advocate for crypto adoption, expressed his enthusiasm on X (formerly Twitter), encouraging Michigan to join Texas in leading on crypto policy.  Michigan’s pension fund already has exposure to Bitcoin and Ethereum via exchange-traded funds (ETFs) ; this is another step in Michigan's embrace of digital assets. Michigan’s move is part of a broader trend in which states across the country are considering crypto reserves as a means of diversification and long-term financial planning. This brings the total number of US states with similar legislation to 20.  

https://legislature.mi.gov/documents/2025-2026/billintroduced/House/pdf/2025-HIB-4087.pdf