South Carolina has officially entered the Bitcoin reserve race with a new bill that proposes the establishment of a state-run reserve.
On the same day, the state dropped its case against Coinbase.
Introduced by Representative Jordan Pace on March 27, the bill, dubbed the Strategic Digital Assets Reserve Act of South Carolina (House Bill 4256), will grant the state treasurer the authority to invest in digital assets like Bitcoin, which can act as a “hedge against inflation and economic volatility.”
What is HB 4256?
The basics of the bill are quite similar to other state crypto reserve bills that have been introduced across other jurisdictions.
If passed, it will allow the treasurer to allocate up to 10% of uncommitted funds from state-managed sources such as the General Fund and Budget Stabilisation Reserve Fund into digital assets.
However, the legislation sets a hard cap of 1 million BTC for the reserve and limits any single digital asset to no more than 3% of the state’s total investment portfolio.
These assets would be held either directly by the state, through a qualified custodian, or in the form of regulated exchange-traded products.
All digital assets must be stored securely using cold storage or certified custody solutions, and the state is prohibited from lending any of the assets it holds.
To maintain transparency, the treasurer would be required to publish public blockchain addresses of all reserve holdings, allowing citizens to verify transactions and balances independently.
Further, the treasurer would conduct independent audits at least once a year and submit the findings to the oversight committees, along with a public summary issued online.
The bill also introduces legislation that will allow the state to accept digital asset donations from South Carolina residents.
The treasurer would be tasked with creating a streamlined process for such contributions via approved vendors.
Lastly, the bill bars the state and its partners from engaging in any activity that would undermine or disrupt the digital asset networks it participates in.
“The State of South Carolina, its agencies, and any contractors or third parties involved in the administration of the Strategic Digital Assets Reserve are strictly prohibited from engaging in, supporting, or coordinating any efforts to disrupt, attack, or undermine the security or operation of the digital asset network,” an excerpt from the bill notes.
What sets HB 4256 apart from other state crypto reserve proposals is its clear emphasis on Bitcoin, which is named multiple times throughout the bill as a core asset in the proposed reserve.
South Carolina softening crypto stance
South Carolina’s Bitcoin reserve bill comes as it appears to be softening its stance on crypto more broadly.
On the same day the bill was introduced, Coinbase’s chief legal officer, Paul Grewal, announced that the state had officially dropped its lawsuit against the exchange’s staking services.
South Carolina, along with nine other states, had sued the exchange in 2023 over claims that its staking service was an unregistered security.
The dismissal clears the way for Coinbase to relaunch staking for South Carolina residents.
Meanwhile, the state is also considering another bill that takes a broader look at how digital assets are treated under South Carolina law.
State Bill 0163, introduced in January, lays out a full framework for how individuals, businesses, and even government bodies can interact with crypto and blockchain technologies.
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