US States Pioneer Targeted Crypto Regulations Amidst Evolving Federal Framework

Executive Summary

US states are advancing targeted crypto regulations, including DUNA Act adoption and state-issued stablecoin initiatives, to foster responsible innovation alongside developing federal legislation, indicating a proactive yet complex regulatory landscape.

The Event in Detail

Amidst a rapidly evolving federal regulatory landscape for cryptocurrencies, US states are implementing targeted measures to promote responsible crypto innovation. Federal legislation, including the GENIUS Act for stablecoins and the CLARITY Act for digital assets, is progressing with bipartisan support, aiming to establish comprehensive national frameworks. Despite this, 27 states and Washington D.C. passed 57 crypto-related bills in 2024, signaling a continuing role for state-level initiatives.

a16z outlines five proactive measures states can adopt:

1. Adopt the Decentralized Unincorporated Nonprofit Association (DUNA) Act: The DUNA Act provides legal recognition for Decentralized Autonomous Organizations (DAOs), allowing them to contract with third parties, appear in court, pay taxes, and protect members. Wyoming became the first state to enact DUNA in March 2024. Notably, Uniswap DAO voted to adopt a Wyoming-registered DUNA as its legal structure, enabling it to maintain decentralized governance while fulfilling regulatory requirements.

2. Ensure Appropriate Token Classification: States are urged to prevent misclassification of non-financial tokens. The Illinois Digital Assets and Consumer Protection Act (DACPA), signed by Governor J.B. Pritzker in August 2025, differentiates between various token types, exempting collectible and arcade tokens from financial regulation when they do not serve speculative financial purposes.

3. Establish Blockchain Task Forces: These task forces facilitate public-private information sharing, equipping state governments with insights into blockchain technology, its use-cases, risks, and benefits. The California Blockchain Working Group, established in 2018, serves as an example, comprising experts from technology, business, government, law, and information security.

4. Pilot Public Sector Blockchain Use-Cases: States are testing blockchain applications to demonstrate utility and improve governmental efficiency. Examples include the California DMV's initiative to digitize car titles to reduce fraud and Utah's law directing its Division of Technology Services to pilot blockchain-based credentials for public sector programs.

5. Use Stablecoins and Develop State Issuance Regimes in Line with GENIUS: While the federal GENIUS Act establishes national rules for payment stablecoins, allowing for state licensing pathways if state regimes are substantially similar to the federal framework (for issuers under $10 billion), states are exploring their own issuance. Wyoming launched the Frontier Stable Token, and North Dakota introduced the Roughrider stablecoin for bank-to-bank transfers, partnered with Fiserv. The GENIUS Act requires 100% reserve backing in US Dollars or short-term government-backed assets, along with monthly disclosures and robust AML/KYC compliance.

Market Implications

The proliferation of state-level crypto initiatives carries significant market implications. The legal recognition of DAOs through acts like DUNA reduces legal ambiguity and potential liability for members, fostering a more secure environment for decentralized projects. This clarity, combined with appropriate token classification, could accelerate the development and adoption of Web3 technologies. The establishment of state-backed stablecoins, while aligning with federal mandates under the GENIUS Act, allows states to experiment with different issuance models and leverage blockchain for enhanced governmental efficiency, potentially streamlining financial transactions from days to minutes. However, the varied approaches across states could lead to a fragmented regulatory landscape, posing challenges for projects operating nationally. Despite this, the overall trend signals a move towards institutional and governmental engagement, potentially solidifying the US's position as a hub for crypto innovation, albeit within a more structured framework.

Expert Commentary

Experts such as Aiden Slavin, Policy Partner at a16z crypto, emphasize that while federal legislation reduces the need for states to build comprehensive crypto regimes, states retain an important role through targeted, practical measures. The GENIUS Act is described by Don Morgan, President and CEO of the Bank of North Dakota, as a "true threshold moment" for integrating stablecoins into the financial system. Sunil Sachdev, Fiserv's senior vice president of embedded finance and digital assets, noted that the Roughrider stablecoin will create "efficiencies for interbank money movement by leveraging 24x7x365 payment rail."

Broader Context

The current wave of state and federal legislative activity reflects a broader acknowledgment of crypto assets' increasing relevance and the imperative for clear, enforceable regulation. Federal acts like GENIUS and CLARITY provide a foundation for consumer protection, regulatory clarity, and innovation. States are acting as "laboratories," experimenting with specific solutions like DAOs' legal status and state-issued stablecoins to meet local needs and inform broader policy. This dual-layer regulatory development aims to de-risk the crypto sector, encourage participation from traditional financial institutions, and potentially accelerate the end of crypto offshoring, contributing to the US's long-term goal of becoming a leader in the digital asset space. The collective effort underscores a significant shift towards integrating digital assets into the mainstream financial and governmental infrastructure.