- House Bill 1202 allows the State Investment Council to invest up to 10% of public funds in Bitcoin.
- Bitcoin holdings must be stored with secure custody solutions, ensuring encrypted keys and multi-party governance.
- Investments can be held directly or through SEC-regulated exchange-traded products with strict oversight and risk controls.
South Dakota lawmakers are preparing to debate a bill that could permit the state to invest in BTC. House Bill 1202, introduced by Representative Manhart, is scheduled for a hearing on Monday. If passed, the legislation would allow the State Investment Council to allocate a portion of public funds to BTC under strict guidelines.
Provisions Of House Bill 1202
The bill proposes an amendment to existing state investment laws, enabling Bitcoin to be included among authorized investment classes. Under the proposal, the State Investment Council could invest up to ten percent of state funds into Bitcoin. The legislation outlines that investments must be held through secure custody solutions or via qualified custodians.
Bitcoin, as defined in the bill, refers to the digital asset underlying exchange-traded products regulated by the U.S. Securities and Exchange Commission (SEC). Investments could also be made through exchange-traded products issued by registered investment companies.
Secure Custody And Observation Requirements
The bill places notable emphasis on the protected storage of BTC holdings. Custody solutions must guarantee that private keys remain solely accessible to the state commodity handling the assets. The keys must be stored in encrypted environments and cannot be accessed via smartphones. Additionally, hardware containing keys must be kept in at least two geographically diversified data centers.
To enhance security, the bill requires multi-party governance structures for transaction approvals and robust user access controls. Custody providers must implement disaster recovery protocols and conduct regular code audits and penetration testing. Any identified vulnerabilities must be promptly addressed.
Investment Restrictions And Oversight
The proposed legislation limits Bitcoin investments to ten percent of available state funds. This restriction aims to manage risk while diversifying the state’s investment portfolio. All Bitcoin acquisitions must be held directly by the State Investment Council or through qualified custodians, including special-purpose depository institutions regulated by the state’s Division of Banking.
The bill defines a qualified custodian as any federally or state-chartered bank or trust company approved to hold digital assets. Investment channels include direct holdings or exchange-traded products traded on U.S.-regulated exchanges.
