Connecticut Flips State Bitcoin Reserve Trend, Bans All Government Crypto Investments

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In brief

Connecticut has unanimously passed the United States’ most restrictive crypto law, barring all state and local governments from purchasing, holding, or investing in virtual currencies.
The legislation mandates “bold” fraud warnings for crypto businesses and requires disclosure of "all material risks" while overhauling money transmission statutes statewide.
Connecticut's ban contrasts sharply with the national trend, as 31 Bitcoin reserve bills remain active across 16 states.

While dozens of states race to establish Bitcoin reserves, Connecticut just slammed the door shut.

The state's General Assembly unanimously passed House Bill 7082 on Tuesday—now Public Act No. 25-66—delivering the nation's most sweeping ban on government crypto investments.

The comprehensive legislation explicitly bars government entities from "establishing a reserve of virtual currency" and prevents them from accepting crypto as payment for any amounts due to the state or its political subdivisions.

The new law represents one of the most restrictive approaches to crypto at the state level, effectively blocking any future state-sponsored digital asset initiatives.

Apart from the investment prohibition, the legislation introduces stringent consumer protection measures that require crypto businesses engaged in money transmission to disclose "all material risks associated with virtual currency.”

The bill mandates that crypto service providers display “bold” warnings saying, "LOSSES DUE TO FRAUDULENT OR ACCIDENTAL TRANSACTIONS MAY NOT BE RECOVERABLE AND TRANSACTIONS IN VIRTUAL CURRENCY ARE IRREVERSIBLE."

Additional protections include verification requirements for users under 18 and comprehensive disclosure requirements for virtual currency transactions.

In addition to banning crypto in public accounts, the law overhauls money transmission statutes, introduces new definitions around digital wallets, control persons, and kiosks, and requires state-licensed firms to adopt rigorous compliance frameworks.

U.S. state Bitcoin reserves

Connecticut's restrictive stance places it at odds with a growing number of states embracing crypto as a strategic asset.

The legislative split points to the rising disagreement over crypto's role in state treasury management, with supporters citing portfolio diversification benefits while opponents raise concerns about volatility and fiduciary responsibility.

Around 31 bills related to state Bitcoin reserves are still in progress, with 16 states moving forward while 8 have rejected proposals, as per reserve bill tracker Bitcoin Laws data.

Despite the rejections, a few lawmakers have vowed to revisit proposals in the future.

New Hampshire became the first state to successfully establish a strategic Bitcoin reserve last month, followed by Arizona with a more limited approach focused on non-tax revenue funds.