a16z: How can U.S. states promote responsible crypto innovation?

Original Title: https://a16zcrypto.com/posts/article/state-crypto-policy-playbook/
Original Authors: Aiden Slavin, a16z crypto Policy Partner, Kevin McKinley, a16z Government Affairs Team Partner
Original Compilation: 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 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 crypto industry. In 2024, 27 states and Washington D.C. collectively passed 57 crypto-related bills.

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

The following will break down five targeted and proactive measures, all based on real-world examples, 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, much like 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 hold the promise of realizing 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 barriers, such as the inability to contract with third parties.

Fortunately, solutions to these problems 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 maintaining decentralization: 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 expanding. Just last month, Uniswap DAO passed a resolution with overwhelming support (52,968,177 votes 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 retain its decentralized governance structure while enabling it to hire service providers and meet regulatory requirements. New blockchain projects are also adopting this framework.

The more widely DUNA is adopted, 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. Through collaborative efforts, these states are expected to accelerate the return of crypto businesses to the U.S. and solidify the country's position as a global crypto 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 distinction from ordinary digital records lies in the fact that tokens exist on a decentralized blockchain, and their modification must adhere to pre-established rules. These rules are executed by autonomous software that is not controlled by any individual, 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 akin to the metal tokens used in traditional amusement parks, providing utility only within specific systems (such as a particular game) and not intended for speculation or investment. Typical examples include "digital gold in virtual worlds" and "points in membership programs."

For instance, the dining 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, community pizza places, and other small businesses with opportunities to retain customers while rewarding consumers who support small businesses.

Similar to entertainment tokens, collectible tokens also do not fall under 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, dining 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 singular term "financial assets" to refer to all tokens, leading individuals and businesses using non-financial attribute tokens to fall under regulatory rules intended for financial institutions.

Misclassifying tokens legally (or 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 thriving development of the crypto industry requires sound policies and regulations, but this necessitates that rules target actual risks rather than constrain those 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 the 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 resulted in a patchwork of contradictory rules, allowing resource-rich compliant large enterprises to consolidate their advantages while small tech companies struggle. Fortunately, federal legislation has largely eliminated the necessity for states to construct their own comprehensive crypto frameworks. However, for specific issues, borrowing from Justice Louis D. Brandeis' metaphor, 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 valuable mechanisms for public-private information sharing among states: 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.

California's blockchain task force is a model for state-level crypto task forces. In 2018, California passed Assembly Bill 2658, requiring the Secretary of the Government Operations Agency to appoint a blockchain technology task force and chair to assess blockchain application scenarios, challenges, opportunities, legal implications, and more.

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 Blockchain Use Cases in the Public Sector

States can also promote responsible crypto innovation and address real-world issues 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 technical understanding, which in turn informs state-level policy-making.

There are already numerous successful cases of blockchain applications in the public sector. The California task force's report did not remain theoretical; its research findings have driven several state-level pilots, such as the state's 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 blockchain-based mobile voting for overseas voters, publishing state government expenditure records on a public blockchain to enhance transparency, and using verifiable health credentials to convey 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 crypto space. Globally, stablecoins will enable faster, cheaper, and programmable payments.

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

In addition to utilizing stablecoins to optimize government projects, states can also participate in the construction of 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 generally consistent with the federal framework.

The specific meaning of "generally consistent" will take time to clarify. 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. As 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 digital dollars through policy-making.

Stablecoins provide states with another opportunity to 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 introduced its own stablecoin, the Border Stable Token.

Conclusion

As federal crypto regulations come into effect, states may no longer need to construct comprehensive crypto regulatory frameworks on their own. However, the role of states remains crucial; by adopting targeted and practical measures, states can promote responsible crypto innovation while ensuring that citizens and local businesses share in the future benefits of the internet. ```