Key Insights:
- Bitcoin legislation in South Dakota shows cautious but growing acceptance of digital assets.
- Strict custody and governance rules highlight lawmakers’ focus on security and risk mitigation.
- State-level Bitcoin initiatives are progressing faster than federal efforts limited by legal hurdles.
Once again, bitcoin is a divisive issue in South Dakota, with a state legislator resuscitating a bill that would permit limited exposure to the digital asset in public investment portfolios. Representative Logan Manhart has reintroduced the House Bill 1155 which has brought to the table the discussed bill last year but was halted due to some volatility, valuation and regulatory clarity concerns.
The plan is closely based upon a measure proposed in early 2025 which was not even out of committee. Back then, legislators mentioned the issues of market instability, asset valuation, and the lack of a clear regulatory precedent.
Manhart said the revised bill reflects adjustments made after earlier discussions, particularly around custody and oversight. He framed the effort as a long-term policy update rather than a call for immediate changes to the state’s investment strategy.
Bitcoin Allocation Limited Under Investment Framework
House Bill 1155 would amend South Dakota’s investment code to allow the State Investment Council to allocate up to ten percent of eligible public funds to Bitcoin. Estimates place the state’s investment pool between sixteen and seventeen billion dollars.
The bill does not require the council to make purchases or commit a fixed allocation. Instead, it expands the list of assets that professional fund managers may consider under existing diversification and risk management standards.
Supporters argue that this structure preserves discretion while acknowledging changes in global financial markets. Any allocation would remain subject to the same oversight applied to traditional assets such as bonds and exchange-traded funds.
Bitcoin Custody Rules Tightened For Risk Control
A central feature of the revised proposal is its detailed custody framework. Any Bitcoin held directly by the state must remain under the exclusive authority of the State Investment Council.
Private keys would need to be stored in encrypted, hardware-secured environments and accessed only through end-to-end encrypted communication channels. The bill also requires password less authentication systems operating on government-issued devices.
To reduce operational risk, private key hardware must be stored in at least two geographically separate secure facilities. Custody providers would also be required to maintain disaster recovery plans, conduct routine code audits, and perform regular penetration testing.
Bitcoin Reserve Debate Reflects Broader State Trend
Assuming that it is enacted, South Dakota would become one of the few states in the U.S. to pass a bill permitting a controlled exposure to Bitcoin or the regulation of electronic assets. The states of Texas, Arizona and New Hampshire are already in the statutes to deal with such issues.
Other states are still experimenting with similar steps, usually in the direction of diversification, protection against inflation, or treatment of confiscated online property. Such activities indicate an increasing interest in whether Bitcoin can be used as the long-term store of value.
On the federal level, the pace has been slower. Even though a Strategic Bitcoin Reserve was created in 2025 with an executive order, legal interpretation has restricted it. The order did not directly permit direct market buys.
The officials have also accepted that the implementation has been delayed by unanswered statutory and administrative issues. This ambiguity has prompted state governments to seek their own way of policy formulation within the legal framework that is there.
With HB 1155 going through the law-making process in South Dakota, it brings back old debates of risk exposure, fiduciary duty, and stability of a portfolio. The bill is still in its infancy and is yet to be voted on the floor.
Regardless of the outcome of the proposal’s success or stalling once more, it emphasises the ways in which Bitcoin is still influencing debates on the topic of public finance. The issue of innovation versus prudence is being debated by lawmakers around the nation as digital assets become increasingly the subject of institutional focus.
