Katie Hobbs Vetoes Plan to Hold Seized Crypto in State Fund

The bill aimed to create a state-managed reserve fund using seized digital assets. Despite the bill passing the House in a 34-22 vote, Hobbs argued that it would disincentivize local law enforcement by reallocating funds away from their jurisdictions. This continues her trend of opposing digital asset legislation after she previously blocked bills proposing state-level Bitcoin investment strategies and reserves. However, she did approve House Bill 2749, which incorporates crypto into Arizona’s financial statutes and unclaimed property laws. Meanwhile, in New York, Attorney General Letitia James criticized two federal stablecoin bills, and warned that they lack sufficient investor protections and may enable fraud. She called for stricter regulation of stablecoin issuers, FDIC protection, and digital identity requirements. In Virginia, crypto-friendly political action committees are making waves, especially after the Protect Progress PAC spent over $1 million to help elect Democrat James Walkinshaw in a special election. The PAC is part of a larger pro-crypto lobbying movement that plans to influence upcoming elections and legislation nationwide. Another Crypto Bill Vetoed by Arizona Arizona Governor Katie Hobbs vetoed a bill that would have created a state-managed fund for holding seized cryptocurrencies, continuing her track record of opposing digital asset legislation. House Bill 2324 proposed the establishment of a “Bitcoin and Digital Assets Reserve Fund,” and was passed by the state House in a 34-22 vote on June 24 after being revived by the Senate. Letter from Katie Hobbs The bill outlined how seized crypto would be allocated: the first $300,000 would go to the attorney general’s office, with any remaining funds split between the AG’s office, the state’s general fund, and the proposed reserve. Hobbs, however, rejected the bill on the grounds that it would discourage local law enforcement from cooperating with state authorities by diverting seized assets away from local jurisdictions. Although the veto could technically be overridden with a two-thirds majority vote in both chambers, this outcome is very unlikely without changes in legislative support. This is not the first time Hobbs blocked cryptocurrency-related proposals. In May, she vetoed Senate Bill 1025, which would have created an Arizona Strategic Bitcoin Reserve allowing up to 10% of state funds to be invested in Bitcoin. She called cryptocurrencies “untested investments.” She also vetoed Senate Bill 1373, which aimed to form a Strategic Digital Assets Reserve using seized crypto assets. Despite these rejections, one crypto-related measure has made it into law. House Bill 2749, which was enacted in May, modifies Arizona’s statutes to incorporate crypto assets into the state’s financial systems and unclaimed property laws, while also establishing a separate Bitcoin and Digital Assets Reserve Fund managed by the state treasurer. Arizona’s efforts are part of the trend among US states exploring the integration of cryptocurrencies into public finance. In June, Texas Governor Greg Abbott signed a bill to create the Texas Strategic Bitcoin Reserve, and in May, New Hampshire passed legislation allowing the state to invest in both cryptocurrencies and precious metals. According to data from Bitcoin Laws, at least six other state legislatures are currently considering similar initiatives. NY Attorney General Slams Stablecoin Bills In New York, Attorney General Letitia James called on Congress to revise two pending stablecoin bills. She argued that they fail to provide sufficient protections for investors and the broader financial system. In a letter sent Tuesday, James criticized the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act and the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, stating they lack the necessary regulatory guardrails. Although both bills have advanced in Congress, James urged lawmakers to take more time to craft legislation that encourages innovation while also safeguarding the integrity of the US banking system. The first page of James’ letter She warned that the bills do not adequately address the dangers of anonymous transactions, which can facilitate fraud and criminal activity. James recommended that stablecoin issuers be regulated in the same manner as banks, given their similar functions, and called for mandatory Federal Deposit Insurance Corporation protection for stablecoin deposits. She also pushed for digital identity requirements for all transactions to eliminate anonymity that could be exploited by bad actors. Additionally, she raised concerns that stablecoins could unfairly disadvantage local community banks already facing economic pressures. Supporters of the proposed legislation, like Senators Kirsten Gillibrand and Bill Hagerty, defended the bills as efforts to protect consumers and uphold the global role of the US dollar However, James maintained her skepticism, and even extended her criticism to the Digital Asset Market Clarity (CLARITY) Act in a separate letter last month. She argued that the bill’s provisions risk enabling fraud by shielding anonymous actors and undermining decades of investor protection laws. Letitia James has a track record of opposing aspects of the cryptocurrency industry. In April, she urged Congress to ban crypto and crypto ETFs from retirement funds after claiming they lack intrinsic value. Her office also took legal action against several digital asset firms and exchanges during her tenure. Pro-Crypto PAC Spends Big in Virginia Race Crypto met politics yet again with James Walkinshaw. He is a Democratic candidate aiming to fill the congressional seat left vacant by the late Representative Gerry Connolly in Virginia’s 11th District, and secured the party nomination after a firehouse primary that was held on Saturday. His victory came after impressive support from a cryptocurrency-backed political action committee, Protect Progress, which reportedly spent more than $1 million in June to back his campaign. The group is affiliated with the larger Fairshake PAC, which is primarily funded by industry players like Coinbase and Ripple Labs. This support is part of a plan by Fairshake to influence elections by backing candidates who are favorable to crypto innovation and regulation. (Source: Federal Election Commission ) In a statement after Walkinshaw’s win, a Fairshake spokesperson talked about the candidate’s resilience against political attacks and praised his commitment to innovation and economic opportunity. They pointed out that voters recognized the value of pro-crypto stances, and suggested that such support is resonating across party lines. The PAC’s activity in Virginia follows similar efforts in April during special elections for two Florida House seats, where its affiliate, Defend American Jobs, spent more than $1.5 million. While crypto-backed PACs were less visible in New Jersey’s June gubernatorial primaries, Fairshake has suggested that it has broader ambitions. As of January, the group reported holding more than $116 million in cash reserves to support crypto-friendly candidates in the 2026 midterm elections. Their aim is to strengthen the representation of crypto advocates in Congress, where 270 “pro-crypto” lawmakers already hold seats after the 2024 elections . Legislative efforts on crypto are also advancing in the current session, with the Senate passing stablecoin regulations and drafting a comprehensive digital asset market structure bill.