South Carolina Embraces Bitcoin and Ends Coinbase Lawsuit

By: Isha Das

South Carolina has embarked on a forward-thinking journey to integrate Bitcoin as a potential reserve asset within its financial strategy while simultaneously retracting its legal action against cryptocurrency exchange Coinbase. Recently introduced, the Strategic Digital Assets Reserve Act proposes that a portion of state funds be allocated to Bitcoin as a hedge against inflation and economic fluctuations. This bill, spearheaded by Representative Jordan Pace, seeks to authorize the State Treasurer to invest up to 10% of state-held funds in Bitcoin, creating a substantial strategic reserve. The legislation outlines a hard cap of 1 million BTC, with transparency measures designed for public accountability, such as requiring disclosure of related wallet addresses on the blockchain.

The legislation allows for citizen involvement through voluntary Bitcoin contributions and proposes rigorous asset protection measures, including utilizing cold wallets and certified custodians. The funds for these investments would be sourced from existing fiscal structures, namely the General Fund and Budget Stabilization Reserve Fund. These steps are perceived as a proactive measure to prepare the state for future economic uncertainties with Bitcoin as a potential safeguard.

On a parallel note, South Carolina has decided to discontinue its lawsuit against Coinbase, which revolved around alleged securities violations concerning its staking services. Originally filed in June 2023, this case accused Coinbase of offering unregistered securities, but the state has chosen to dismiss these charges following an agreement with the exchange. Paul Grewal, Coinbase's Chief Legal Officer, expressed that this resolution removed obstacles for South Carolinians to benefit from staking rewards and anticipates other states will emulate this decision.

This legal shift reflects a broader trend, with Vermont having previously dismissed a similar lawsuit. The timing coincides with recent actions from regulatory bodies, marking a period of significant clarity and adjustment in the crypto legal landscape. South Carolina's dual actions—a progressive legislative proposal and the withdrawal of its lawsuit—highlight a budding acceptance of digital assets within the framework of state governance.