Kentucky Passes Bitcoin and Ethereum Self-Custody Law

Kentucky Passes Law to Protect Self-Custodied Bitcoin and Cryptocurrency Holders

Kentucky Governor Andy Beshear has signed House Bill 701, which provides greater protections for individuals who self-custody their Bitcoin and cryptocurrency. This legislation aims to safeguard the rights of individuals who choose to store and manage their digital assets independently.

What is Self-Custody?

Self-custody refers to the process of holding and managing one’s private keys, allowing users to have full control over their digital assets. This is similar to holding cash in a wallet, as opposed to using a debit card to authorize transactions. By self-custody, individuals take on the responsibility of protecting their holdings, and this new law aims to protect their rights.

The Risks of Self-Custody

As an example, a man in Wales has been trying for 12 years to gain permission to excavate a landfill to retrieve a hard drive containing 8,000 Bitcoin worth $696 million at today’s prices. This highlights the risks involved in self-custody, as individuals must take responsibility for protecting their digital assets.

Kentucky’s New Law

The new law received unanimous support in the House (91-0) and Senate (37-0) before being signed by Governor Beshear. This legislation guarantees the rights of individuals to hold and manage their cryptocurrencies in self-hosted wallets, ensuring that those in Kentucky can maintain control over their digital assets without interference.

Implications for Local Governments

This new law also clarifies that local governments will not be able to enact discriminatory laws targeting crypto mining. Additionally, the law exempts operating blockchain nodes and staking from Kentucky’s money transmitter regulations, providing greater clarity for individuals involved in these activities.

Other States Considering Bitcoin Reserves

Kentucky’s move comes as a growing number of states are exploring the use of cryptocurrency. Currently, a third of states are considering allocating public funds to digital assets, with 19 states in ongoing legislative discussions. Utah passed a bill in January, authorizing the state treasurer to allocate up to 5% of certain public funds to "qualifying digital assets" with a market capitalization of over $500 billion.

Conclusion

Kentucky’s new law is a significant step towards protecting the rights of individuals who choose to self-custody their Bitcoin and cryptocurrency. As more states explore the use of digital assets, it is essential to ensure that individuals have the freedom to manage their holdings independently. This legislation serves as a model for other states to follow, promoting greater transparency and clarity in the world of cryptocurrency.

FAQs

Q: What is self-custody in the context of cryptocurrency?
A: Self-custody refers to the process of holding and managing one’s private keys, allowing users to have full control over their digital assets.

Q: What are the risks involved in self-custody?
A: Individuals who choose to self-custody their digital assets take on the responsibility of protecting their holdings, and this can be a significant risk, as seen in the example of the man in Wales trying to retrieve a hard drive containing 8,000 Bitcoin.

Q: How does Kentucky’s new law impact local governments?
A: The law exempts operating blockchain nodes and staking from Kentucky’s money transmitter regulations, providing greater clarity for individuals involved in these activities.

Q: Which other states are exploring the use of cryptocurrency?
A: A third of states are currently considering allocating public funds to digital assets, with 19 states in ongoing legislative discussions.

Q: What is the current state of public opinion on the use of cryptocurrency?
A: While there is growing interest in the use of digital assets, there are still many states that are not exploring this option.