South Carolina explores Bitcoin reserve, drops Coinbase lawsuit

South Carolina has taken a significant step toward integrating digital assets into state-level financial strategy.

On March 27, the state lawmakers introduced a new bill to create a Bitcoin reserve to safeguard public funds from inflation.

At the same time, the state dropped its lawsuit against Coinbase over alleged securities violations tied to its staking services.

Representative Jordan Pace introduced a new bill allowing South Carolina to invest some public funds in Bitcoin.

The proposed legislation, the Strategic Digital Assets Reserve Act (H4256), positions Bitcoin as a safeguard against inflation and economic instability.

The bill would authorize the State Treasurer to allocate up to 10% of state-held funds to Bitcoin if passed. However, there’s a hard limit—South Carolina cannot hold more than 1 million BTC.

Meanwhile, the funds for these investments would come from existing sources such as the General Fund and the Budget Stabilization Reserve Fund.

The bill goes a step further by setting transparency standards. It requires the public disclosure of wallet addresses linked to the Bitcoin reserve. This would allow citizens to monitor transactions and verify holdings on the blockchain.

In a unique twist, the bill also allows residents to make voluntary Bitcoin contributions. The proposal outlines strict storage requirements to protect the assets, including the use of cold wallets or certified custodians.

Alongside the legislative push, South Carolina has decided to withdraw its legal challenge against Coinbase.

The case, filed in June 2023, accused the crypto exchange of violating securities laws through its staking services.

However, the dismissal followed an agreement between the state’s securities division and Coinbase.

Coinbase’s Chief Legal Officer, Paul Grewal, welcomed the news, noting that South Carolina residents had missed nearly $2 million in staking rewards during the legal dispute.

Nonetheless, Grewal praised the state’s decision and expressed optimism that other states—such as California, New Jersey, and Illinois—would follow suit.

Meanwhile, this decision mirrors a similar move by Vermont, which dropped its lawsuit earlier in March.

The withdrawal comes shortly after the US Securities and Exchange Commission (SEC) ended its case against Coinbase in February.

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