Summary — HB 1184 (North Dakota): Digital Asset and Precious Metal Investments
Status: Introduced Nov 12, 2024. Placed on second reading and failed to pass (yeas 32, nays 57).
Purpose
- Authorize limited investments in certain digital assets and precious metals by three state fiduciaries (Board of University and School Lands, State Investment Board, and State Treasurer) and set custody, custody‑security, and operational guardrails.
Scope / Where in law
- Creates new sections in the North Dakota Century Code: chapter 15‑01 (Board of University and School Lands), chapter 21‑10 (State Investment Board / SRIO), and chapter 54‑11 (State Treasurer / General Fund).
Key provisions
- 10% cap: Each named fiduciary may invest up to 10% of the funds they manage in any combination of:
- Precious metals (defined as gold, platinum, or silver in coin, bullion, or other form);
- Digital assets with an average market capitalization > $500 billion over the previous year; or
- Stablecoins (defined as corporate‑issued, dollar‑backed or HQLA‑backed, redeemable on demand at par in USD).
- Custody requirements:
- Digital assets must be held directly by the fiduciary through a “secure custody solution” or on the state’s behalf via a qualified custodian or approved exchange‑traded product.
- Precious metals must be held directly in a secure facility or via a qualified custodian or exchange‑traded product.
- Secure custody solution standards (examples required by statute):
- Private keys exclusively accessible by the owner; encrypted end‑to‑end; not stored/controllable by a smartphone; hardware stored in at least two geographically diversified, designated secure data centers.
- Multiparty governance for authorizations, user access controls and logs, disaster recovery protocol, regular audits and penetration testing with prompt remediation.
- Operational authorizations:
- Staking permitted if the state retains legal ownership of the asset.
- Lending of digital assets permitted if it increases return and does not increase financial risk to the state.
- Definitions provided: “digital asset,” “exchange‑traded product,” “precious metal,” “private key,” “qualified custodian,” “secure custody solution,” “stablecoin,” and “staking.”
Who is affected
- Board of University and School Lands (including its strategic and permanent funds).
- State Investment Board / State Retirement and Investment Office (funds under 21‑10‑06).
- State Treasurer (all funds invested by the treasurer, including the general fund).
- Indirectly affects custodians, custodial service providers, exchanges, and any third‑party staking/lending providers.
Potential impacts and considerations
- Expands permissible asset classes for state portfolios, potentially increasing diversification and return opportunities.
- Market‑cap threshold (> $500B) sharply narrows eligible cryptocurrencies (effectively limiting which tokens qualify).
- Operational and security standards raise the bar on custody but introduce implementation complexity and vendor/technology risk.
- Staking and lending introduce additional counterparty, smart‑contract, and operational risk despite potential yield benefits.
- Liquidity, valuation, regulatory, and reputational risks remain material considerations for public funds.
Procedural / timeline notes
- Bill was introduced Nov 12, 2024. It advanced to second reading but failed to pass (yeas 32, nays 57), so it did not become law in this session.
