Arizona Governor Katie Hobbs has vetoed a proposed law that would have created a state-managed reserve fund for digital assets seized through criminal forfeiture, citing concerns it could undermine cooperation with local law enforcement.
House Bill 2324, which narrowly passed the state legislature with a 34-22 vote in the House and a 16-14 margin in the Senate, sought to empower the Arizona State Treasurer to establish a “Bitcoin and Digital Assets Reserve Fund.”
The fund would have enabled the state to invest, reinvest, and divest digital assets, including cryptocurrencies and exchange-traded funds (ETFs) holding such assets, that had been confiscated through criminal proceedings.
“This bill disincentivizes local law enforcement from working with the state on digital asset forfeiture by removing seized assets from local jurisdictions,” Hobbs said in a July 1 letter to House Speaker Steve Montenegro, signaling her disapproval of the asset reallocation mechanism embedded in the proposal.
Had it been signed into law, HB 2324 would have placed Arizona among a small but growing cohort of U.S. states experimenting with digital asset management and crypto-focused fiscal infrastructure.
Earlier this year, Arizona passed HB 2749, which deals with unclaimed crypto assets and was seen as a pioneering move, following New Hampshire’s legislative lead in creating a crypto reserve structure.
Unlike HB 2749, which targets abandoned digital assets, the vetoed HB 2324 was focused on assets seized from alleged criminal activity, highlighting the tension between centralizing financial oversight and maintaining local law enforcement incentives.
Arizona is concurrently considering other cryptocurrency-related bills, including SB 1062, which seeks to expand the legal definition of “legal tender” to include cryptocurrencies, reinforcing the state’s ambitions to position itself as a digital asset-friendly jurisdiction.
The veto marks a setback for crypto advocates in the state legislature and comes amid a national debate on how governments should manage, regulate, and potentially benefit from seized digital assets.
It also underscores the practical challenges of integrating decentralized technologies into traditional public finance systems, especially when competing interests between state and local authorities are at stake.