Author: Aiden Slavin & Kevin McKinley, a16z

Translated by: Tim, PANews

U.S. federal cryptocurrency legislation is advancing rapidly. In the past three months, President Trump has signed the "Guiding and Establishing U.S. Stablecoin National Innovation Act" (GENIUS Act), and the House of Representatives has overwhelmingly passed the landmark "Digital Asset Market Clear Act" (CLARITY Act) with bipartisan support.

However, the U.S. federal government is not the only legislative body seeking to establish road rules for the cryptocurrency industry. In 2024, 27 states and Washington D.C. have passed a total of 57 cryptocurrency-related bills.

Although federal legislation, which focuses on protecting consumers, providing regulatory clarity, and encouraging innovation, has significantly reduced or even eliminated the need for states to implement comprehensive cryptocurrency regulations on their own, states can still play an active role in promoting responsible cryptocurrency innovation.

The following will detail five targeted proactive measures, all based on real cases, that governments can use to ensure citizen safety and support the development of local blockchain businesses.

1: Adopt DUNA

Unlike corporations, decentralized blockchain networks do not have a board of directors or a CEO. Their goal is to transfer governance power to users through Decentralized Autonomous Organizations (DAOs), thereby eliminating centralized control mechanisms.

Without DAOs, blockchain technology could be co-opted by centralized forces, which have created today's internet feudalism—a governance model dominated by a few giants: the reign of companies like Meta, Google, and Amazon. These exploitative, centralized enterprises are detrimental to both users and innovation. If tech giants ultimately control blockchain networks, the blockchain-based internet (sometimes referred to as "Web3") is likely to repeat the pitfalls of the existing cyberspace: rampant surveillance, cybercrime, content censorship, and value extraction, among other issues.

By empowering users with governance rights over blockchain networks, DAOs help realize the internet's original promise: openness, decentralization, and user control. However, DAOs currently face numerous challenges, and some organizations have even become targets of legal and regulatory actions. Just last year, a court ruled that any actions taken by DAO participants (including posting on public forums) could expose members to legal liability under general partnership laws for the actions of other members. This poses significant legal risks for DAO members and generally undermines the viability of this organizational form. DAOs also face more common but still harmful obstacles, such as the inability to contract with third parties.

Fortunately, solutions to these issues are emerging. In March 2024, Wyoming became the first state in the nation to pass the "Decentralized Unincorporated Nonprofit Association Act" (DUNA). This act allows blockchain networks to maintain their decentralized characteristics while complying with the law, granting decentralized autonomous organizations legal entity status, allowing them to contract with third parties, appear in court, fulfill tax obligations, and provide essential legal protections for members. In short, the act gives decentralized autonomous organizations the same legal status as other business forms like limited liability companies.

The development of Decentralized Unincorporated Nonprofit Associations (DUNAs) is accelerating. Just last month, Uniswap DAO (the governing body of the popular DeFi protocol of the same name) passed a resolution with overwhelming support (52,968,177 votes in favor, 0 against) to adopt a DUNA registered in Wyoming as the legal framework for the Uniswap governance protocol. This legal structure will allow Uniswap to maintain its decentralized governance framework while retaining functionalities such as service provision and meeting regulatory requirements. Many newly launched projects are also beginning to adopt this legal framework.

As the DUNA framework becomes more widespread, DAOs will be better positioned to transcend corporate networks and help build an open, user-driven internet. Wyoming's pioneering DUNA legislation is built on years of exploration, including the state's earlier UNA regulations. Other states with mature UNA legal frameworks can also unlock the potential for Web3 development by adopting the DUNA model. These combined efforts will accelerate the end of the trend of the cryptocurrency industry migrating overseas and solidify the U.S. position as a global leader in the cryptocurrency industry.

2. Ensure Existing Laws Do Not Misclassify Tokens, Leading to Improper Treatment

Tokens are data indexes that record information such as quantity and permissions. The difference between tokens and ordinary digital records is that, because tokens exist on a decentralized blockchain, their changes must follow predetermined rules. These rules are executed by autonomous software without human control, allowing tokens to grant holders enforceable digital property rights.

Although we have categorized them into seven major types, the application scenarios for tokens are virtually limitless. While many people mistakenly believe that tokens are merely meme coins used for trading or financial assets similar to Bitcoin, in reality, many common types of tokens do not possess financial attributes. Take game tokens, for example; as their name suggests, these tokens function like old metal tokens in arcade halls, providing utility within specific systems like games, rather than being designed for speculation or investment. Typical examples include digital gold in virtual worlds and reward points in membership programs.

For instance, the dining membership app Blackbird connects merchants and customers through a points system, with its exclusive points FLY becoming key to activating consumer interactions. Customers can use FLY points to redeem items like cold brew coffee and receive membership rewards. This model not only helps local cafes and street pizza shops enhance customer loyalty but also allows consumers to receive tangible benefits while supporting small businesses.

Similar to arcade game tokens, collectible tokens are also not financial instruments. These tokens, commonly referred to as "non-fungible tokens" (NFTs), primarily serve as proof of ownership of items or rights. A collectible token can represent ownership of a song, a concert ticket, or proof of ownership of any unique item or right.

Clearly, restaurant points and songs are not financial instruments like company stocks or bonds; arcade game tokens and collectible tokens neither provide nor have promised or implied financial returns. Additionally, there are numerous examples of non-speculative tokens, ranging from identity credentials to in-game assets.

Therefore, it is essential to clarify that arcade game tokens, collectible tokens, and other non-speculative digital assets should not be conflated with financial instruments. However, it is common to see states using a single term like "financial assets" to refer to all types of tokens. The improper consequence of this is that individuals and businesses using non-financial attribute tokens are required to comply with regulatory rules designed for financial institutions.

Misclassifying token categories in law, or attempting to define all tokens under a single standard, will inevitably lead to improper regulation. The consequences of this could be perplexing.

Imagine if a coffee shop owner had to apply for a financial services license to launch a customer rewards program, or if a musician had to obtain approval from local financial regulators to issue tokens representing ownership of their new single. Such requirements not only burden small businesses, artists, and users but also do not benefit consumer protection. The cryptocurrency industry needs reasonable policies and regulations to thrive, which requires rules that address real risks rather than burden those truly driving national growth and innovation.

The "Digital Assets and Consumer Protection Act" (DACPA), signed into law by Illinois Governor Pritzker in August 2025, serves as a legislative example of properly addressing tokens at the state level. This act recognizes that different tokens carry different risks and sets financial regulatory exemptions for tokens used for non-financial speculative purposes, such as arcade game tokens and collectible tokens, as they do not involve the risks that the regulatory framework aims to prevent. States should follow Illinois' example by legislating to ensure proper classification and differentiated treatment of tokens.

3: Establish a Blockchain Task Force

The frequent emergence of conflicting state laws has created a patchwork regulatory network composed of contradictory rules, which erects barriers for large companies with compliance resources while making it difficult for small tech companies. Fortunately, federal legislation has largely eliminated the need for states to create comprehensive cryptocurrency regulatory frameworks on their own. However, for certain specific issues, states should continue to maintain, borrowing from Justice Louis D. Brandeis's metaphor, the "laboratory" role of policy innovation.

The first step in deciding whether and how to conduct national-level experiments is to establish a blockchain task force. The task force can provide an important communication platform for states by establishing a public-private information-sharing mechanism. This institution, composed of government and industry professionals, can help governors and legislative bodies fully understand the application scenarios, advantages, risks of blockchain technology, and the impact of federal policies on state agendas, while also providing decision-making support for policy coordination among states.

A typical example of a state-level blockchain task force is the California Blockchain Task Force. In 2018, California enacted AB 2658, which tasked the Secretary of the State Government Operations Agency with appointing a blockchain task force and chair to assess the application scenarios, challenges, opportunities, and legal implications of blockchain technology.

This 20-member expert group represents multiple disciplines, including technology, business, government, law, and information security. Two years later, the group submitted a report to the legislature containing policy recommendations and proposals to adapt existing laws to the specific needs of blockchain.

4: Public Sector Blockchain Application Pilot Cases

State governments can also pilot blockchain applications in the public sector to promote responsible cryptocurrency innovation and address real-world issues. These pilot projects serve a dual purpose: enhancing awareness of the broad utility of the technology and demonstrating its practical benefits for government operations. The benefits of public sector blockchain initiatives extend beyond any single pilot project. State government agencies can learn through practice, enhancing their understanding of the technology and using these experiences to inform state-level policy development.

Excellent examples of public sector blockchain applications already exist. The California task force's report is not just theoretical; its research findings have led to multiple state-level pilot projects. For example, the Department of Motor Vehicles is using blockchain technology to digitize vehicle ownership to prevent fraud and improve efficiency; Utah has legislated to require the state technology services department to conduct a pilot for digital credentials based on blockchain for public projects. Other application scenarios include providing mobile blockchain voting for overseas voters, publishing government expenditure data on public chains to enhance transparency, and conveying medical test results through verifiable health credentials in a privacy-protecting manner.

By piloting and promoting these applications, countries can better understand the application scenarios of blockchain while improving government services for the benefit of the public.

5: Use Stablecoins and Establish a National Issuance System Compliant with GENIUS

Stablecoins represent a significant opportunity to attract a billion users into the cryptocurrency space. Globally, they will enable faster, cheaper, and programmable payment methods.

States can also benefit from digital dollars. Stablecoins can optimize government procurement and payment processes by reducing costs, increasing efficiency, and enhancing auditability. As long as states adopt privacy-protecting methods to ensure citizen data security, these projects can bring convenience to both governments and residents.

In addition to optimizing government projects with stablecoins, states can also develop stablecoin issuance systems based on local needs: while the GENIUS Act establishes national standards for payment stablecoin issuers, it still reserves state-level licensing pathways for issuers whose issuance does not exceed $10 billion and whose state regulatory framework is largely consistent with federal standards.

It will take time to clarify the specific meaning of "substantially similar." The "Payment Stablecoin Act" has passed legislation with broad bipartisan support in both houses of Congress, setting high standards for stablecoin issuers, including implementing asset-backed and transparency requirements, and establishing strict anti-money laundering and customer identity verification regulations. This act will take effect in January 2027, or four months after the major federal stablecoin regulatory agency issues final regulations (whichever comes first). During this period, federal agencies will refine the implementation details of the act, including specific requirements for state systems to meet or exceed federal standards. As the federal government advances the implementation of the act, states can begin to explore whether adjustments or upgrades to local stablecoin legislation are necessary.

The GENIUS Act clearly states that states must meet federal regulatory requirements for stablecoin issuers, but the law allows local governments to participate in policy-making, jointly shaping the future development of digital currencies.

Stablecoins provide states with another opportunity to become "laboratories," allowing them to experiment with different stablecoin issuance mechanisms to meet local needs. States like California have already enacted stablecoin-related regulations, and Wyoming has even launched a local stablecoin—"Frontier Stable Token."

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