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Arizona lawmakers have taken significant steps to modernize their approach to digital assets by reviving House Bill 2324 (HB 2324), which aims to expand the state’s forfeiture laws to include cryptocurrencies and establish a dedicated Bitcoin reserve fund. After a June 19 vote in the Senate, the bill is now set to return to the Arizona House of Representatives for further consideration.

What is HB 2324?

HB 2324 is a proposed measure that seeks to create a “Bitcoin and Digital Assets Reserve Fund” and update Arizona’s asset forfeiture laws to encompass digital assets such as cryptocurrencies. This includes redefining legal terms to formally recognize virtual currencies and other digital items with economic value.

The bill outlines specific procedures for law enforcement agencies to handle seized digital assets. These procedures require the use of secure, state-approved digital wallets to ensure the safekeeping of confiscated cryptocurrencies. Additionally, the bill introduces an allocation framework for forfeited assets:

  • The first $300,000 worth of forfeited digital assets will go to the Attorney General’s office.
  • Any remaining value will be divided as follows: 50% to the Attorney General, 25% to the state’s general fund, and 25% to the newly created Bitcoin and Digital Assets Reserve Fund.

HB 2324 also strengthens protections for innocent property owners and sets limits on the types of property that can be seized, such as vehicles, ensuring greater fairness in the forfeiture process.

Legislative Progress and Key Supporters

The bill initially faced setbacks, failing to pass the Arizona House of Representatives on May 7. However, it was revived after a narrow 16-14 vote in the Senate, with Republican Senator Janae Shamp filing a motion to reconsider. The bill now requires a majority vote in the 60-member House, where Republicans hold 33 seats, before it can head to Governor Katie Hobbs for potential approval.

Supporters of HB 2324 argue that the legislation is essential to address the evolving role of digital assets in criminal activities and economic transactions. By equipping law enforcement with updated tools and procedures, the state aims to stay ahead in managing the complexities of cryptocurrency-related cases.

HB 2324 vs. HB 2749: Key Differences

HB 2324 is distinct from House Bill 2749 (HB 2749), another cryptocurrency-related measure signed into law earlier this year. While both bills involve the creation of a Bitcoin and Digital Assets Reserve Fund, their purposes and funding mechanisms differ significantly:

  • HB 2324: Focuses on criminal forfeiture, with funds sourced from seized digital assets during criminal investigations.
  • HB 2749: Addresses unclaimed digital assets, requiring them to be transferred to the Arizona Department of Revenue if unclaimed for at least three years. This bill also prohibits the use of taxpayer money and allows the reserve fund to benefit from staking rewards or airdrops.

Importantly, HB 2749 does not involve law enforcement procedures or criminal forfeiture. Instead, it establishes a regulatory process for managing abandoned digital assets.

Arizona’s Broader Role in Digital Asset Legislation

Arizona is among a growing number of states exploring the integration of digital assets into public finance. Earlier this year, New Hampshire passed its own cryptocurrency legislation, authorizing the state treasurer to invest up to 10% of public funds in Bitcoin and other high-market-cap digital assets. These measures highlight a broader trend of U.S. states adapting to the increasing adoption of cryptocurrencies and leveraging their potential for economic and financial innovation.

As HB 2324 moves closer to a final decision, its outcome could set a precedent for other states considering similar approaches to managing digital assets in criminal and public finance contexts.

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