Arizona governor blocks plan to convert seized crypto into state fund

Arizona Governor Katie Hobbs has vetoed a controversial bill that would have allowed the state to stockpile seized crypto from criminal cases, dealing a blow to lawmakers pushing for Arizona to take a more aggressive approach to digital asset forfeitures.

The decision, announced Tuesday, would be the third time Hobbs has rejected crypto-related legislation this year, raising questions about the state’s stance on digital assets.

Why the bill was rejected

House Bill 2324 would have established the “Bitcoin and Digital Assets Reserve Fund,” a state-managed repository for seized crypto obtained through criminal forfeitures. Under the proposal, proceeds would have been split between law enforcement and Arizona’s general fund.

However, Hobbs argued the measure would discourage local agencies from collaborating with the state on digital asset seizures.

“Removing seized crypto entirely from local jurisdictions disincentivizes cooperation between state and local law enforcement,” Hobbs wrote in her veto letter.

The bill had narrowly passed the Arizona House in a 34-22 vote last month after initially failing in May. While lawmakers could override the veto with a two-thirds majority, analysts say that’s unlikely without significant shifts in support.

How the seized crypto fund would have worked

The proposed fund would have operated under strict guidelines:

• The first $300,000 in seized crypto per case would go to the attorney general’s office.

• Any amount beyond that would be split—50% to the AG, 25% to the state’s general fund, and 25% to the new reserve.

Supporters argued the fund would help Arizona capitalize on the growing trend of crypto-related crime, where assets like Bitcoin are increasingly confiscated in fraud, money laundering, and cybercrime cases.

Critics, however, warned that the plan could create conflicts between state and local agencies over who controls forfeited digital assets.

Hobbs’ history of rejecting crypto bills

This isn’t the first time Hobbs has clashed with lawmakers over crypto legislation. In May, she vetoed two other bills:

• Senate Bill 1025: Would have allowed Arizona’s treasury to invest in Bitcoin, which Hobbs called an “untested investment.”

• Senate Bill 1373: Similar to HB 2324, it proposed a state-managed reserve for seized crypto.

So far, only one major crypto bill has survived Hobbs’ scrutiny—House Bill 2749, which integrates digital assets into Arizona’s financial regulations while creating a separate reserve managed by the state treasurer.

Other states pushing for crypto reserves

While Arizona hesitates, other states are moving forward with plans to stockpile seized crypto and even state-owned Bitcoin holdings.

• Texas: Governor Greg Abbott recently signed a bill creating the “Texas Strategic Bitcoin Reserve,” allowing the state to hold BTC as a long-term asset.

• New Hampshire: Passed a law in May permitting state investments in crypto and precious metals.

• Six other states: According to Bitcoin Laws, multiple legislatures are considering similar measures.

What’s next for Arizona’s crypto policies?

With Hobbs’ latest veto, Arizona’s approach to seized crypto remains uncertain. Lawmakers could attempt to revise the bill to address her concerns, but time is running short in the current legislative session.

For now, the fate of forfeited digital assets in Arizona stays in the hands of local agencies, leaving the state without a unified strategy for handling seized crypto at a time when other jurisdictions are racing ahead.