North Carolina Proposes 10% Bitcoin Allocation for Public Funds

North Carolina has taken a significant step towards embracing cryptocurrency as a strategic reserve asset with the introduction of Senate Bill 327 (SB327). This bill, proposed by Republican Senators Todd Johnson, Brad Overcash, and Timothy Moffitt, aims to allocate up to 10% of the state's public funds to Bitcoin. The legislation envisions Bitcoin investment as a "financial innovation strategy" to bolster North Carolina’s economic standing and position the state as a leader in cryptocurrency adoption.

The bill outlines strict measures for the management and security of Bitcoin holdings. The State Treasurer is tasked with ensuring that Bitcoin is stored in multi-signature cold storage and subject to monthly audits for transparency and security. Any liquidation of Bitcoin holdings would be permitted only in cases of a "severe financial crisis" and would require approval from two-thirds of the General Assembly. Additionally, the bill mandates the creation of a Bitcoin Economic Advisory Board to provide ongoing guidance on the reserve's management.

SB327 also authorizes the State Treasurer to engage in Bitcoin-backed investment strategies, including staking, lending, and other regulated yield-generating activities. The bill further includes the possibility of Bitcoin mining operations as a means to increase the state’s holdings at a lower cost. This comprehensive approach aims to leverage the potential benefits of digital currencies while mitigating associated risks.

North Carolina's push for Bitcoin as a reserve asset is part of a broader trend among U.S. states exploring the integration of cryptocurrency into state policy. Alongside SB327, lawmakers have proposed House Bill 92 (HB 92), which allows the State Treasurer to invest in Bitcoin exchange-traded products (ETPs). HB92 proposes allocating up to 10% of public funds and retirement systems into these ETPs, which must track digital assets with a minimum average market capitalization of $750 billion over the past twelve months, with Bitcoin being the only asset fitting the criteria.

This state-level initiative comes as the broader financial landscape witnesses increased interest in digital currencies. The potential for Bitcoin to serve as a hedge against inflation and economic uncertainty has garnered attention from both individual investors and institutional players. North Carolina's move aligns with this trend, signaling a willingness to adapt to the evolving financial environment. However, the path to approval for these bills involves thorough scrutiny and debate, with lawmakers weighing the potential benefits against the risks associated with investing in a relatively new and volatile asset class.

If approved, North Carolina's decision to invest in Bitcoin could set a precedent for other states considering similar measures. The state's general fund, with its substantial resources, could serve as a model for how public funds can be diversified to include digital assets. This move could also spur further innovation in the cryptocurrency space, as more states and institutions explore the potential of digital currencies as part of their financial strategies. The introduction of these bills underscores the growing interest in cryptocurrency and its potential to reshape the financial landscape, marking a significant shift in how public funds are managed and invested.