With the implementation of federal cryptocurrency regulations, states may no longer need to build comprehensive cryptocurrency regulatory systems on their own.

Written by: Aiden Slavin and Kevin McKinley, policy partner and government affairs team partner at a16z crypto, respectively

Translated by: Luffy, Foresight News

Cryptocurrency legislation at the federal level in the United States is advancing rapidly. In just the past three months, President Trump signed the "American Stablecoin Guidance and National Innovation Act" (referred to as the GENIUS Act), and the House of Representatives passed the landmark "Digital Asset Market Clarity Act" (referred to as the CLARITY Act) with overwhelming bipartisan support.

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

Although federal legislation significantly reduces the necessity for states to build comprehensive cryptocurrency regulatory frameworks, states can still play an active role in promoting responsible cryptocurrency innovation.

The following will break down five targeted and proactive measures based on real-world cases, aimed at helping states protect citizens' rights and support the development of local blockchain businesses.

1. Adopt DUNA

Unlike traditional businesses, decentralized blockchain networks do not have a board of directors or a CEO. Instead, they aim to transfer governance power to users through Decentralized Autonomous Organizations (DAOs), thereby eliminating centralized control mechanisms.

Without DAOs, blockchain networks could be dominated by centralized forces, similar to the current feudal fragmentation of the internet, which is dominated by a few giants like Meta, Google, and Amazon. These centralized, predatory companies are detrimental to both users and innovation. If large tech companies ultimately control blockchain networks, the blockchain-based internet (Web3) may repeat the mistakes of the current cyberspace: issues such as surveillance, cybercrime, censorship, and value extraction will proliferate.

By empowering users to govern blockchain networks, DAOs have the potential to realize the original vision of the internet: open, decentralized, and user-controlled. However, today's DAOs face numerous challenges and 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 lead to members being held legally liable for the actions of other members under general partnership law. This not only poses significant legal risks for DAO members but fundamentally undermines the viability of the DAO organizational form. Additionally, DAOs face some everyday yet destructive 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 U.S. to enact the "Decentralized Unincorporated Nonprofit Association Act" (DUNA). This act allows blockchain networks to comply with the law while remaining decentralized: it grants DAOs legal entity status, allows DAOs to contract with third parties, participate in litigation, pay taxes, and provides core protections for DAO members against liability for the actions of others. In short, DUNA places DAOs on equal legal footing with traditional business forms like limited liability companies.

The influence of DUNA is continuously expanding. Just last month, Uniswap DAO passed a resolution with overwhelming votes (52,968,177 in favor, 0 against) to adopt the DUNA registered in Wyoming as the legal framework for Uniswap's governance protocol. This move allows Uniswap to maintain its decentralized governance structure while enabling it to hire service providers and meet regulatory requirements. New blockchain projects are also increasingly adopting this framework.

The more widespread DUNA becomes, the more capable DAOs will be in competing with enterprise-led centralized networks, thereby contributing to the construction of an open, user-controlled internet. Wyoming's pioneering DUNA legislation is based on years of practice, including the state's earlier adoption of the "Unincorporated Nonprofit Association Act" (UNA). Other states with functional UNA frameworks can release the potential of Web3 by adopting DUNA on their own. Through collaborative efforts, these states are expected to accelerate the return of cryptocurrency businesses to the U.S. and solidify America's position as a global cryptocurrency hub.

2. Ensure Existing Laws Do Not Misclassify and Improperly Regulate Tokens

Tokens are data records that capture information such as quantity and permissions. The difference between tokens and ordinary digital records is that tokens exist on a decentralized blockchain, and their modification must adhere to pre-established rules. These rules are executed by autonomous software without control, allowing tokens to confer "enforceable digital property rights" to their holders.

While we categorize tokens into seven major types, the application scenarios for tokens are virtually limitless. Moreover, contrary to the common misconception that "tokens are merely meme coins or Bitcoin-like assets used for trading," many common types of tokens do not possess financial attributes. For example, entertainment tokens, as the name suggests, are similar to traditional amusement park metal tokens, providing utility only within specific systems (such as a particular game) and not used for speculation or investment. Typical cases include "digital gold in virtual worlds" and "points in membership programs."

For instance, the restaurant loyalty app Blackbird issues points to customers and allocates revenue to restaurants, with its entertainment token FLY facilitating interaction between restaurants and customers. Customers can use FLY to purchase cold brew coffee and earn loyalty rewards, thereby providing local coffee shops and community pizzerias with opportunities to retain customers while rewarding consumers who support small businesses.

Similar to entertainment tokens, collectible tokens are also not financial instruments. These tokens are often referred to as non-fungible tokens (NFTs), and their utility value stems from recording ownership of an item or right. A collectible token may represent ownership of a song, a concert ticket, or any unique item or right.

Clearly, restaurant points and songs do not belong to financial instruments like company stocks or corporate bonds; neither entertainment tokens nor collectible tokens promise or imply any financial return. Additionally, there are many other examples of non-speculative tokens, such as identity credentials and in-game assets.

Therefore, the key is to avoid conflating entertainment tokens, collectible tokens, and other non-speculative digital assets with financial instruments. Unfortunately, many states commonly use the single term "financial assets" to refer to all tokens, leading individuals and businesses using non-financial attribute tokens to be subjected to regulatory rules intended for financial institutions.

Misclassifying tokens under the law (even worse, using a single definition to classify all tokens) will inevitably lead to improper regulation of tokens, with potentially absurd consequences.

Imagine if a coffee shop owner needed to obtain a financial services license to offer a points program to customers; or if a musician had to consult local financial regulators to issue a token representing ownership of their new song. Such requirements would impose a heavy burden on small businesses, artists, and users, and are not necessary for consumer protection. The robust growth of the cryptocurrency industry requires sound policies and regulations, but this necessitates that rules target actual risks rather than constrain businesses and creators that drive state economic growth and stimulate innovation.

Illinois' "Digital Assets and Consumer Protection Act" (DACPA) is a model of reasonable state-level regulation of tokens. In August 2025, Governor Pritzker signed this act. DACPA recognizes that different tokens carry different risks and explicitly excludes businesses using entertainment tokens, collectible tokens, and other non-speculative tokens from financial regulation, as these tokens do not present the risks that the financial regulatory framework is designed to address. Other states should follow Illinois' example to ensure that laws classify and regulate tokens reasonably.

3. Establish Blockchain Task Forces

Conflicting state laws have led to a plethora of contradictory rules, which solidify the advantages of resource-rich compliant large enterprises while small tech companies struggle. Fortunately, federal legislation has largely eliminated the necessity for states to build comprehensive cryptocurrency frameworks on their own. However, for specific issues, borrowing the metaphor from Justice Louis D. Brandeis, states should still act as laboratories for policy innovation.

When determining "whether and how to conduct policy experiments," establishing blockchain task forces is a good first step. Task forces provide states with a valuable mechanism for public-private information sharing: their members include both government officials and industry professionals, who can provide governors and legislative bodies with information related to blockchain technology, including application scenarios, benefits, risks, the impact of federal policies on state policy agendas, and how the state can coordinate policies with other states.

The California Blockchain Task Force is a prime example of a state-level cryptocurrency task force. In 2018, California passed the "AB 2658 Act," requiring the Secretary of the Government Operations Agency to appoint a blockchain technology task force and chair to assess the application scenarios, challenges, opportunities, and legal implications of blockchain.

The task force consists of 20 members, covering experts from various fields, including technology, business, government, law, and information security. Two years later, the task force submitted a report to the state legislature, containing policy recommendations and proposals for how to adjust existing laws to accommodate the unique needs of blockchain.

4. Pilot Public Sector Blockchain Use Cases

States can also promote responsible cryptocurrency innovation and address real-world problems by testing blockchain applications in the public sector. These pilots serve a dual purpose: on one hand, they help the public understand the broad utility of blockchain technology; on the other hand, they demonstrate the actual value of blockchain in enhancing government operational efficiency. The benefits of public sector blockchain projects extend beyond a single pilot: state government agencies learn from practice to enhance their technological understanding, which in turn guides state-level policy-making.

There are already numerous successful cases of public sector blockchain applications. The California task force's report did not remain theoretical; its research findings have driven several state-level pilots, such as the state Department of Motor Vehicles utilizing blockchain to digitize vehicle ownership to reduce fraud and improve efficiency. Utah has passed legislation requiring the state technology services department to pilot blockchain-based public project credentials. Other application scenarios include providing overseas voters with blockchain-based mobile voting, publishing state government expenditure records on a public blockchain to enhance transparency, and using verifiable health credentials to deliver medical test results in a privacy-protecting manner.

By piloting and promoting these applications, states can gain deeper insights into blockchain's application scenarios while providing tangible benefits to citizens in the form of optimized government services.

5. Utilize Stablecoins and Build State-Level Issuance Systems Under the GENIUS Act

Stablecoins provide a reliable pathway for 1 billion people to enter the cryptocurrency space. Globally, stablecoins will enable faster, cheaper, and programmable payments.

States can also benefit from digital dollars. Stablecoins can optimize government procurement and grant processes, reducing costs, improving efficiency, and enhancing auditability. As long as states adopt privacy protection measures to ensure the security of citizens' data, these projects will create a win-win situation for governments and residents.

In addition to utilizing stablecoins to optimize government projects, states can also participate in building stablecoin issuance systems based on local needs. Although the GENIUS Act establishes national rules for payment stablecoin issuers, it also reserves space for state-level issuance licenses, provided that the issuer's outstanding issuance scale is below $10 billion and the state-level issuance system is largely consistent with the federal framework.

The specific meaning of "basic consistency" will take time to determine. The GENIUS Act has received broad bipartisan support in both the House and Senate, setting strict standards for stablecoin issuers, including asset backing, transparency requirements, and robust anti-money laundering (AML) and know your customer (KYC) compliance requirements. The Act will take effect in January 2027, or four months after the federal stablecoin primary regulatory agency issues final rules (whichever is later). During this period, federal agencies will refine the implementation details of the GENIUS Act, including what requirements state-level systems must meet to achieve or exceed federal standards. While the federal government advances the implementation of the GENIUS Act, states can begin to explore whether adjustments or advancements in local stablecoin legislation are necessary.

The GENIUS Act explicitly requires that if states wish to regulate stablecoin issuers, they must meet the requirements of the federal framework; however, the Act also allows local governments to participate in shaping the future form of the digital dollar through policy-making.

Stablecoins provide states with an opportunity to once again act as laboratories for policy experimentation, allowing them to pilot different stablecoin issuance systems based on local needs. States like California have already enacted stablecoin-related legislation; Wyoming has even launched its own state stablecoin, the Border Stable Token.

Summary

With the implementation of federal cryptocurrency regulations, states may no longer need to build comprehensive cryptocurrency regulatory systems on their own. However, the role of states remains important; by adopting targeted and practical measures, states can promote responsible cryptocurrency innovation while ensuring that citizens and local businesses share in the dividends of the internet's future.

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