In recent weeks all eyes have been on Congress as various bills regulating digital assets advance. But state legislatures have been busy as well, with several considering new legislation on digital assets and cryptocurrency.

Kentucky House Bill 701 (“KHB 701”), signed into law by Governor Andy Beshear on March 24, 2025, establishes a regulatory framework for blockchain digital assets and provides protections for the use of Bitcoin and other cryptocurrencies within the state. The bill introduces new sections to Kentucky Revised Statutes (“KRS”) Chapter 369, defining key terms related to blockchain technology, including blockchain networks, digital assets, and wallets. It permits individuals to utilize digital assets and wallets without incurring additional taxes specific to the payment method, while still allowing standard taxation similar to transactions using U.S. legal tender. The legislation sets guidelines for node operations, facilitating blockchain participation and staking, and shields providers from liability when merely validating transactions. It amends KRS 286.11-007 to exempt activities such as the development or deployment of blockchain protocols, the exchange of digital assets, and node operations from money transmitter license requirements. Additionally, KRS 292.340 is amended to clarify that offering staking as a service is not considered offering or selling a security. Through these provisions, the bill aims to integrate blockchain technology into Kentucky’s legal and business landscapes.

KHB 701 exemplifies a growing trend among states to establish comprehensive legal frameworks for blockchain and cryptocurrency use, reflecting an increasing willingness to enhance the legitimacy of digital asset technologies nationwide. While Kentucky’s legislative efforts are noteworthy, it is one among several states pursuing similar initiatives to facilitate the integration and acceptance of these innovative technologies. The following states have either passed or are in the process of enacting comparable legislation:

• Utah’s House Bill 230, titled “Blockchain and Digital Innovation Amendments,” empowers the state treasurer to invest public funds in digital assets and prohibits state and local governmental entities from restricting the acceptance or custody of digital assets. The bill establishes the right to operate nodes, develop software, transfer digital assets, and participate in staking on blockchain protocols. It creates exemptions from money transmitter licensing requirements for certain blockchain and digital asset activities and restricts political subdivisions from imposing sound limitations or zoning restrictions on digital asset mining businesses in industrial zones.
• Montana’s Senate Bill 265, titled the “Financial Freedom and Innovation Act” revises cryptocurrency laws to enhance the state’s regulatory framework for digital assets. The bill prohibits governing authorities from accepting or testing central bank digital currencies, promoting the use of decentralized digital assets instead. It allows individuals and businesses to freely use digital assets, operate nodes, develop software, transfer assets, and participate in staking on blockchain protocols, fostering technological innovation and financial freedom. Importantly, the bill exempts staking services from being classified as securities, reducing regulatory burdens and encouraging growth in this sector.
• Ohio’s House Bill 116, known as the “Blockchain Basics Act,” was passed by the House, is in committee in the Senate, and seeks to revise existing laws to address the regulation, taxation, and mining of digital assets. The bill would amend sections of the Revised Code and enact new provisions to prohibit counties and municipal corporations from imposing taxes, fees, or assessments specifically on digital assets used as payment methods unless they would apply similarly to transactions using U.S. legal tender. Further, it would ensure that individuals and businesses could engage in digital asset mining, operate nodes, and develop blockchain software without holding a money transmitter license.

Not all states have approached blockchain regulation as warmly as Kentucky and its peers. In the following instances, proposed blockchain legislation faced challenges and ultimately stalled in committees, highlighting varying attitudes and pace of adoption across the country:

• South Carolina Senate Bill 163 aimed to allow digital asset transactions without disparate tax or zoning treatment. It included provisions exempting certain blockchain activities from money transmitter licensing and clarified that offering digital asset mining or staking services does not constitute offering a security. The bill died after being referred to the Senate Committee on Labor, Commerce, and Industry on May 6, 2025, ending its legislative progress.
• Mississippi House Bill 1590 aimed to prohibit government agencies and political subdivisions from accepting or testing central bank digital currencies while ensuring individuals could use digital assets for purchasing goods and services without facing additional taxes. The bill sought to exempt participants in digital asset activities, such as mining and node operations, from money transmitter licensing requirements, and clarified that offering digital asset mining or staking services would not be considered offering a security. However, the bill died on February 4, 2025, after being sent to the Banking and Financial Services Committee, halting its progress.

According to the National Conference of State Legislatures, in the 2025 legislative session, at least 40 states have introduced or are considering legislation concerning cryptocurrencies and digital assets. The varying landscape for cryptocurrency regulation across the United States reflects differing approaches and priorities among the states. KHB 701, offers a roadmap for states seeking to adopt more generous and supportive frameworks for blockchain and digital assets. While Kentucky’s approach sets an encouraging precedent, the future of cryptocurrency regulation remains uncertain, as evidenced by bills like Mississippi’s House Bill 1590 and South Carolina’s Bill 163, which faced challenges and ultimately stalled in committees. As states continue to grapple with the complexities of digital asset regulation, the path forward will likely depend on balancing innovation with oversight to ensure both growth and security in the evolving crypto landscape.

Max Nakos, a 2025 summer associate, assisted in the preparation of this post.