Trading Bitcoin Stock, Crypto as Legal Tender, Oh My! How Arizona is Working Toward Becoming a Leader in Cryptocurrency

By Avery Cartwright.

Did you know that you can now buy stock shares in Bitcoin on the New York Stock Exchange (NYSE), simply by using any stock brokerage app? Last week, ProShares launched an exchange-traded fund linked to Bitcoin futures. This means that people can invest in Bitcoin like any other company traded on the NYSE. Of course, someone who invests in this way does not actually hold any cryptocurrency directly. However, this may be the beauty of it—people can now get involved with Bitcoin without needing to take any of the perceived risks associated with unregulated cryptocurrency exchanges.

Here’s how the exchange-traded fund (ETF) works: the ETF speculates on the future price of Bitcoin, meaning that investors on the NYSE are essentially betting on actual Bitcoin’s price fluctuations. Therefore, the price of Bitcoin itself is not guaranteed to be the same as the price and performance of the shares purchased on the NYSE. They are technically two different things. However, these investment avenues for cryptocurrency are by their nature interrelated. The price of Bitcoin (the cryptocurrency itself) jumped by more than 4% on the day the ETF was launched, a similar jump to that of Bitcoin futures. The launch of this Bitcoin-linked ETF will likely have a broader impact on the cryptocurrency market in the United States. Arizona in particular may be at the forefront of the growth of cryptocurrency as a legitimate asset.

ARIZONA AND CRYPTOCURRENCY

Arizona has recently become a hotbed for the development and increasing legitimacy of cryptocurrency. Realtors in the Scottsdale area recently announced that they were selling luxury condos and would accept cryptocurrency as payment. An individual in Sedona used Bitcoin to purchase a home. Many believe this is just the beginning of a larger movement toward using cryptocurrency in these types of important transactions, signaling that cryptocurrency may actually be usable as a legitimate asset.

HB 2544: Establishing the Blockchain and Cryptocurrency Study Committee

This year, Governor Doug Ducey signed HB 2544 establishing a study committee for blockchain and cryptocurrency in Arizona. TThe committee will include members of the senate and house of representatives, representatives from the cryptocurrency industry, academics who specialize in blockchain research, and general public members, among others.

The committee was created to perform various responsibilities, such as reviewing data on the broader scope of cryptocurrency in the country, compiling potential legislation on cryptocurrency, and submitting a report by the end of 2022 to list the committee’s findings and recommendations for future legislative priorities regarding blockchain and cryptocurrency.

Creating this committee to enact new crypto-related policy may be an important step toward making Arizona a “cryptocurrency capital.” Potential policy changes include introducing incentive structures for residents who use cryptocurrency and enabling citizens to pay taxes directly to the state using cryptocurrency. Through cooperation with huge cryptocurrency companies like Dash, Arizona can be at the forefront of state-initiated cryptocurrency initiatives. Through these initiatives, Arizonans would be able to minimize various costs associated with transactions as we currently know them.

“Legal Tender Act” Initiatives

In 2019, the Free Market Solutions committee petitioned for an initiative for a new Arizona statute that would recognize cryptocurrency as legal tender in Arizona, enabling its use even in debt and tax payment. This was not the first initiative of its kind. In 2017, a similar initiative was filed, also seeking to broaden the definition of “legal tender” in Arizona to include cryptocurrency when it is agreed upon as a unit of trade. Although neither of these initiatives garnered enough signature support to make it on the ballot, it still provides an indicator of the changing mindset about cryptocurrency more broadly.

THE BIGGER PICTURE

The legitimacy of cryptocurrency continues to evolve as the consumer population comes to better understand how it  works. Mixed expert opinions exist as to whether using cryptocurrency as full-blown legal tender is really a good idea. On the one hand, crypto could provide for cheaper and faster payments, make the financial system more inclusive, and ensure more transparency and fungibility in all types of transactions all over the world. However, simply deciding to elevate a cryptocurrency to legal tender status could have harmful effects on macro-financial stability, financial integrity, and consumer protection.

The bottom line is that most Americans still don’t even really understand how cryptocurrency works; in fact, many don’t even seem to care about it. Nevertheless, cryptocurrency is rapidly evolving, bolstered further by its newest launch on the NYSE. Arizona is taking important steps now by trying to develop the best possible understanding of this currency and how it may impact Arizonans in the near future.

"Bitcoin, bitcoin coin, physical bitcoin, bitcoin photo" by antanacoins is licensed under CC BY-SA 2.0

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By Avery Cartwright

J.D. Candidate 2023

Avery is an ASLJ Staff Writer and 2L at ASU’s Sandra Day O’Connor College of Law. She is from Phoenix, Arizona, and she earned her BSE from Arizona State University (forks up forever). She is currently the president of ASU Law’s Intellectual Property Student Association and serves as a student practitioner in the Patent Law Clinic. She is excited to pursue a career in IP litigation upon graduation. Outside of law school, she enjoys bouldering, playing and watching sports, hiking, and watching reality TV shows.

The opinions expressed herein are those of the individual contributors to the ASLJ Blog and should not be construed as the opinions of the Arizona State Law Journal or the Sandra Day O’Connor College of Law at Arizona State University.