Kentucky Passes Bill Protecting Bitcoin Self-Custody and Mining

Kentucky lawmakers have approved HB 701, a bill that strengthens Bitcoin self-custody rights and protects crypto mining operations. The legislation, which received unanimous support, now awaits the governor’s signature and could solidify Kentucky’s reputation as a pro-crypto state.

The bill, introduced by Representatives Adam Bowling and T.J. Roberts, ensures that individuals can hold and manage their own digital assets without interference. It also provides legal protections for Bitcoin miners by preventing unfair zoning regulations that could restrict mining activities. Additionally, it removes certain licensing requirements for small-scale miners, making it easier for independent participants to enter the industry.

Kentucky’s Senate Majority highlighted the importance of these protections, emphasizing that node operators and staking providers will not be held liable for validated transactions. The bill also makes it clear that Bitcoin mining and staking activities are exempt from securities and money transmitter regulations, ensuring a more favorable environment for businesses operating in the space. The Attorney General’s Office has been granted the authority to enforce these exemptions.

One of the most significant provisions in HB 701 is the clarification that Bitcoin mining and staking services will not be classified as securities. This distinction provides much-needed regulatory certainty for industry participants, reducing legal risks and encouraging further investment in the state’s crypto sector.

Beyond self-custody and mining, the bill also protects the use of digital assets for payments. It explicitly states that digital assets used as payment will not be subject to additional taxes or fees beyond those applied to standard financial transactions. This measure aims to promote Bitcoin’s role as a medium of exchange and encourage its adoption in everyday commerce.

With both legislative chambers approving HB 701, the bill is now awaiting the governor’s signature. If signed into law, it will reinforce Kentucky’s standing as a blockchain-friendly state, potentially attracting more businesses and innovation in the digital asset sector.

At the same time, lawmakers are reviewing a separate proposal to establish a Bitcoin reserve. This initiative would allow Kentucky to allocate a portion of its surplus funds into digital assets as an alternative store of value. While the bill does not explicitly mention Bitcoin, it references digital assets with a market capitalization exceeding a specific threshold, a requirement currently met only by Bitcoin.

Although this proposal is still under consideration, Kentucky’s approach reflects a growing trend among states looking to embrace cryptocurrency. By advancing pro-Bitcoin policies, the state positions itself as a leader in fostering blockchain adoption and innovation.