State Rep. Steve Demetriou, R-Bainbridge Twp., speaks during an Ohio House session. (Photo by Graham Stokes for Ohio Capital Journal. Republish photo only with original article.)
Ohio House lawmakers have begun hearings on cryptocurrency legislation aimed at protecting people who spend it and businesses that mine it. One bill even seeks to establish a state cryptocurrency reserve.
State Rep. Steve Demetriou, R-Bainbridge Twp., is championing the effort, and describes it as a way to position Ohio as a “leader” in the digital asset space.
“If we truly want to lead, we have to show our country and the world that we are ready to put our money where our mouth is by diversifying our investments via crypto currency,” he said when introducing legislation related to cryptocurrency.
But there could be headwinds. Even as he introduced his crypto reserve legislation, Demetriou acknowledged “ongoing discussions” with the Treasurer of State’s Office and that changes reflecting that input are likely.
Cryptocurrency reserve
Demetriou’s cryptocurrency reserve bill grants the state treasurer authority to invest as much as 10% of the uncommitted money in the general revenue fund or state’s rainy-day fund, as well as the trust fund that covers lottery winnings.
“It grants but does not mandate the treasurer of the state to invest,” he added.
The proposal also limits the digital assets the treasurer can purchase to those with a market capitalization of $750 billion or more. With a market cap of roughly $1.5 trillion, Bitcoin is currently the only cryptocurrency that qualifies.
State Rep. Ismail Mohamed, D-Columbus, pressed Demetriou about how the treasurer is supposed to assess the financial risks of using state dollars to buy Bitcoin.
Demetriou said the intent of his bill is to park that money as a long-term investment.
“We’re not looking for the treasurer’s office to start day-trading,” he said.
Demetriou argued that although Bitcoin’s value fluctuates like any other asset, it’s more stable than one might realize.
“So, I think as of like the 23rd of (February), the S&P 500’s 60-day historical volatility index was somewhere around 12.5%,” he said. “Bitcoin’s was under 3%.”
In addition to limiting the cryptocurrencies in which the treasurer may invest, the measure also limits how the treasurer does so. Under the bill, investments could be handled through a bank or similar institution, or in-house with a “secure custody solution.”
That would include hardware for controlling the assets in at least two separate locations with multiple people involved in authorizing transactions. Smartphone access is explicitly forbidden under the bill.
The Capital Journal reached out to the treasurer’s office about Demetriou’s legislation but got no response.
Blockchain basics
Cryptocurrencies rely on a public ledger tracking all previous transactions to establish mutual confidence in the asset’s value. But that ledger, known as the blockchain, can be used for other transactions, too.
Ohio’s U.S. Sen. Bernie Moreno started a company that uses blockchain technology to transfer vehicle titles online.
Demetriou’s “blockchain basics” measure establishes several limits on how blockchain companies and users can be regulated in Ohio — the overall object being to prohibit policies that disfavor blockchain companies.
“For example, the Blockchain Basics Act prohibits the government from treating anyone differently for transacting with digital assets through unnecessary taxes or fees,” he explained. “And it also ensures that Ohio businesses can accept digital assets as a form of payment.”
He added that the measure would place limits on local zoning.
“It prevents undue discrimination against the data centers that make Bitcoin function,” he said. “Local municipalities can still put forward restrictions, but they need to be general, or at least on par with restrictions that would apply to other similar businesses.”
Demetriou described it as balancing local authority against “ensuring that Ohio does not miss out on this quickly growing industry.”
Data centers focused on “mining” digital assets are ideal candidates for “interruptible load” energy services, which get shut off when demand is high, he said. Notably, a power customer must first opt in to an interruptible load program.
More fundamentally, however, Demetriou said the proposal sets down clear definitions for elements of the blockchain industry that could serve a statutory foundation into the future.
“So moving forward,” he said, “other legislators that want to regulate this even more, or deregulate — whatever they want to do — they have some sort of framework to work within.”