Kentucky has become the latest US state to propose legislation for a Bitcoin reserve, furthering the momentum behind digital asset adoption at the state level. The bill, KY HB376, was introduced by State Representative Theodore Joseph Roberts on 6 February, making Kentucky the 16th state to take such a step.
Proposal to Invest State Reserves in Bitcoin
If passed, the bill would authorise the State Investment Commission to allocate up to 10% of excess state reserves into digital assets, including Bitcoin. The legislation states:
“The total amount of excess cash invested under subsection (9)(k), (l), and (m) of this section shall not, at the time of the investment is made, exceed ten percent (10%) of the total amount of excess cash invested under subsection (9) of this section.”
While the bill does not explicitly mention specific cryptocurrencies, it outlines criteria that limit investment to digital assets—excluding stablecoins—with a market capitalisation exceeding $750 billion, averaged over the previous calendar year.
Bill KY HB376. Source: Legiscan.com
At present, Bitcoin is the only cryptocurrency meeting this threshold, boasting a market capitalization of $1.9 trillion. In contrast, Ethereum, with a market cap of $330 billion, would need to more than double in value to qualify.
Kentucky Joins a Growing Trend
Kentucky follows in the footsteps of 15 other US states, including Arizona, Alabama, Florida, Massachusetts, Missouri, New Hampshire, North Dakota, South Dakota, Ohio, Oklahoma, Pennsylvania, Texas, Utah, Kansas, and Wyoming, all of which have introduced similar legislation.
The move underscores the increasing recognition of Bitcoin as a viable asset for state reserves, signalling a shift towards mainstream institutional adoption of cryptocurrency.
A Step Towards a Federal Bitcoin Reserve?
Kentucky’s legislation could have far-reaching implications. According to intergovernmental blockchain expert and author Anndy Lian, the state’s initiative may set a precedent for a federal-level Bitcoin reserve.
“If Kentucky moves forward, it creates a roadmap for others to follow,” Lian told Cointelegraph.
He highlighted that such moves could force federal regulators, including the Securities and Exchange Commission (SEC) and the Federal Reserve, to determine Bitcoin’s classification in public reserves—whether as a commodity, a security, or an entirely new asset class.
However, Lian also cautioned against potential regulatory fragmentation, stating:
“This could accelerate regulatory clarity, but it also risks creating a patchwork of state-level rules that complicate national policy.”
Concerns Over Volatility and Consumer Protection
Despite growing enthusiasm, concerns remain over Bitcoin’s price volatility and its potential impact on taxpayers. Lian noted that if Bitcoin’s value were to drop significantly, the financial burden could fall on taxpayers, raising governance and risk management questions.
US states with Bitcoin reserve bill propositions. Source: Bitcoinlaws
“Let’s not forget the consumer protection angle: if Bitcoin’s volatility tanks, taxpayers could be on the hook, which raises serious governance questions,” he said.
To mitigate such risks, Kentucky would need to implement strong custody solutions, cybersecurity measures, and an exit strategy should the investment face significant losses.
Institutional Interest on the Rise
Despite the risks, the introduction of KY HB376 marks a “massive vote of confidence” in Bitcoin, potentially driving further adoption. Lian believes Kentucky’s move could encourage institutional interest and prompt other states—and even countries—to explore similar strategies.
“It could drive institutional interest through the roof, pushing other states and even countries to consider similar moves. But adoption isn’t just about price; it’s about infrastructure.”
Kentucky’s proposal follows Illinois’ announcement last week of plans for its own Bitcoin reserve bill, which suggests a minimum Bitcoin holding period of five years.
With momentum building across multiple states, the question remains whether the US will eventually move towards a federal Bitcoin reserve policy, bringing national-level regulatory clarity to digital assets.
