North Carolina’s House of Representatives has passed a bill allowing the state’s treasurer to invest public funds in approved cryptocurrencies, which will now head to the Senate.

The House passed the Digital Assets Investment Act, or House Bill 92, on its third reading on April 30 by a vote of 71 to 44.

Republican House Speaker Destin Hall introduced the bill in February, which would allow the treasurer to allocate 5% of the state’s investments into designated digital assets.

The investments can only be made after obtaining an independent third-party assessment confirming that the crypto holdings are maintained with a secure custody solution and risk oversight and regulatory compliance standards are met. 

New amendments allow the treasurer to examine the feasibility of allowing members of retirement and deferred compensation plans to elect to invest in digital assets held as exchange-traded products (ETPs).

The House also passed a related bill, the State Investment Modernization Act, or HB 506, with little discussion on April 30, in a 110 to 3 vote.

The bill aims to create the North Carolina Investment Authority (NCIA) to take over investment management from the treasurer.

If passed into law, authority to invest in digital assets would transfer from the treasurer to NICA, and it would require approval from its board of directors based on third-party assessments to make crypto investments.

Local news outlet NC Newsline reported that Treasurer Brad Briner supports both bills.

Arizona leads the crypto bill race

North Carolina is second to Arizona in the state-level race to approve legislation allowing local governments to invest in cryptocurrencies. 

Related: New Hampshire Bitcoin reserve bill heads to full Senate vote

On April 28, Arizona’s House approved two bills, SB 1025 and SB 1373, proposing different methods for the state to establish a crypto reserve.

Arizona is the only state whose House and Senate have passed crypto-related bills, which are both awaiting Governor Katie Hobbs’ decision.

Magazine: ZK-proofs unlock trillions in Bitcoin for DeFi — BitcoinOS and Starknet

Nearly 30 crypto advocate groups led by the lobby group the Crypto Council for Innovation (CCI) have asked the Securities and Exchange Commission for clear regulatory guidance on crypto staking and staking services.

The CCI’s Proof of Stake Alliance (POSA) group argued in an April 30 letter to the agency’s Crypto Task Force lead, SEC Commissioner Hester Peirce, that staking is fundamentally a technical process, not an investment activity. 

“Staking isn’t niche — it’s the backbone of the decentralized internet,” the letter said. 

The letter responded to the SEC’s call for public input on whether staking and liquid staking, where crypto users lock up their tokens to earn more, should be regulated under federal securities laws.

The coalition called for the SEC to support responsible inclusion of staking features in exchange-traded products (ETPs), and “avoid overly prescriptive rules that could freeze market structures and stifle innovation in the staking space.”

The group argued that staking fails to meet the securities-defining Howey test definition of an “investment contract” as stakers retain ownership of their assets.

They added that blockchain protocols, not a staking provider’s efforts, determine rewards, and providers don’t deliver profits through managerial decisions like a company does. 

The letter requested that the SEC Issue principles-based guidance similar to recent SEC staff statements on proof-of-work mining.

“In the past 4 months, we’ve seen more movement and constructive dialogue with the SEC than in the past 4 years,” the group said. “Now, the industry is stepping up with concrete principles to include in guidance — a reflection of this new collaborative approach.”

Related: Ethereum ETF staking will have little impact without multimonth rally: Analyst

The group argued that the existing securities disclosure regime is ill-suited for staking services, which are fundamentally technical rather than financial in nature. 

Big names in support of staking clarity 

The Proof of Stake Alliance includes several high-profile crypto organizations and companies, including the venture capital firm Andreessen Horowitz (a16z), blockchain software firm Consensys, and the crypto exchange Kraken, which restored staking services in the US earlier this year.

The SEC has yet to approve a crypto staking exchange-traded fund (ETF) and delayed the decision on allowing staking for Grayscale’s spot Ether ETF on April 14.

In April, Bloomberg ETF analyst James Seyffart predicted that an Ether ETF that includes staking could come as soon as May.

Magazine: ZK-proofs unlock trillions in Bitcoin for DeFi — BitcoinOS and Starknet