Arizona Shuts Down Bitcoin Reserve Plan, Sparking Debate Over Seized Crypto Funds

Key Takeaways:

• Arizona Governor Katie Hobbs vetoed HB 2324, a bill proposing a Bitcoin and digital asset reserve fund sourced from criminal forfeitures.
• The bill faced pushback due to concerns it would reduce local law enforcement’s incentive to cooperate in crypto-related seizures.
• This marks the latest in a string of vetoes by Hobbs on crypto-focused legislation, raising questions about the state’s stance on digital asset integration.

Arizona’s efforts to establish a state-managed Bitcoin and digital asset reserve fund have hit a wall. On July 1, Governor Katie Hobbs vetoed House Bill 2324 (HB 2324), citing concerns that it could undermine cooperation between local law enforcement and state agencies in asset forfeiture cases involving cryptocurrencies.

This decision adds to a growing list of crypto-related bills rejected by the governor, signaling a cautious—if not skeptical—approach toward digital asset policy in Arizona.

Read More: Arizona Moves Closer to Holding Bitcoin Reserves as Senate Revives Controversial Bill

Arizona’s HB 2324: A Bold Vision Cut Short

HB 2324 aimed to create a “Bitcoin and Digital Assets Reserve Fund” within the Arizona State Treasury. The fund would consist solely of cryptocurrencies seized in criminal investigations. The proposed bill passed both the state Senate and House, with a 34–22 vote in the latter, before being struck down at the governor’s desk.

The Breakdown of the Fund’s Distribution Structure

Under HB 2324, the first $300,000 in proceeds from any sale of seized crypto would be funneled to the Arizona Attorney General’s Office. Any amount beyond that would be split:

• 50% to the Attorney General’s Office
• 25% to the state’s general fund
• 25% to the proposed reserve fund

Critics argued this model would dilute local agencies’ incentives by cutting them out of the distribution pipeline. Without a clear benefit, local law enforcement might deprioritize cooperation with state-level digital asset seizures.

Governor Hobbs’s Stance: A Consistent Pattern

Governor Hobbs cited jurisdictional complications and the potential to disincentivize law enforcement participation as key reasons for the veto. This isn’t the first time Hobbs has blocked crypto-related legislation.

Her veto history includes:

• Senate Bill 1025: Would have allowed up to 10% of Arizona’s treasury and pension funds to be invested in digital assets.
• Senate Bill 1373: Proposed the creation of a broader Digital Assets Strategic Reserve Fund.
• Senate…