How are the 50 U.S. states reshaping the future of blockchain under the "Crypto Charter"?

Federal crypto legislation in the United States is advancing rapidly. Over the past three months, President Trump has signed the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), and the House of Representatives has passed the landmark Digital Asset Market Clarity Act (CLARITY Act) with overwhelming bipartisan support.

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

Although federal legislation—focused on consumer protection, providing regulatory clarity, and encouraging innovation—has significantly reduced or even completely eliminated the need for states to implement comprehensive crypto regulation on their own, states can still play a positive role in promoting responsible crypto innovation.

The following details five targeted proactive measures, all based on real-world cases, which governments can use to protect citizens and support the development of domestic blockchain enterprises.

1: Adopting DUNA

Unlike corporations, decentralized blockchain networks have no board of directors or CEO. Their goal is to place governance in the hands of users through decentralized autonomous organizations (DAOs, pronounced “dow”), thereby eliminating centralized control mechanisms.

Without DAOs, blockchain technology risks being co-opted by centralized powers, which have created today’s internet feudalism—a governance model dominated by a handful of giants: Meta, Google, Amazon, and the like. These exploitative, centrally controlled companies benefit neither users nor innovation. If tech giants ultimately control blockchain networks, the blockchain-based internet (sometimes called “Web3”) is likely to repeat the pitfalls of the current web: rampant surveillance, cybercrime, content censorship, value extraction—all the same problems will return.

By empowering users to govern blockchain networks, DAOs help realize the internet’s original promise: openness, decentralization, and user autonomy. But today, DAOs face many challenges, and some organizations have recently become targets of legal and regulatory action. Just last year, courts ruled that any involvement in a DAO (including posting on public forums) could make members legally liable for the actions of other members under general partnership law. This creates significant legal risks for DAO members and undermines the viability of the organizational form overall. DAOs also face more common but still harmful obstacles, such as the inability to contract with third parties.

Fortunately, solutions to these problems already exist. In March 2024, Wyoming became the first state in the U.S. to pass the Decentralized Unincorporated Nonprofit Association Act. This law allows blockchain networks to maintain their decentralized characteristics while complying with the law, grants DAOs legal personhood, allows them to contract with third parties, appear in court, fulfill tax obligations, and provides key legal protections for members. In short, the law gives DAOs the same legal status as other business forms such as limited liability companies.

The development of Decentralized Unincorporated Nonprofit Associations (DUNA) is accelerating. Just last month, Uniswap DAO (the governing body of the popular DeFi protocol of the same name) overwhelmingly passed a resolution (52,968,177 votes in favor, 0 against) to adopt a Wyoming-registered DUNA as the legal structure for Uniswap’s governance protocol. This legal structure will allow Uniswap to retain functions such as service providers and regulatory compliance while maintaining its decentralized governance architecture. Many new projects are also beginning to adopt this legal framework.

As the DUNA framework becomes more widespread, DAOs will be better able to surpass corporate networks and help build an open, user-driven internet. Wyoming’s pioneering DUNA legislation builds on years of exploration, including the state’s earlier UNA regulations. Other states with mature UNA legal frameworks can also unlock Web3’s potential by adopting the DUNA model. These combined efforts will accelerate the end of the crypto industry’s migration overseas and solidify the United States’ position as the global leader in the crypto industry.

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

Tokens are data indexes that record quantities, permissions, and other information. What distinguishes them from ordinary digital records is that, because tokens exist on decentralized blockchains, their changes must follow preset rules. These rules are enforced by autonomous software controlled by no one, so tokens can grant holders enforceable digital property rights.

Although we have divided them into seven major categories, the use cases for tokens are virtually limitless. While it is commonly believed that tokens are just meme coins for trading or financial assets like bitcoin, in reality, many common token types do not have financial attributes. Take game tokens, for example: as the name suggests, these tokens are like old-fashioned metal tokens in arcades, providing utility within specific systems such as games, and are not designed for speculation or investment. Typical examples include digital gold in virtual worlds and points rewards in membership programs.

For instance, the restaurant membership app Blackbird connects merchants and customers through a points system, with its exclusive FLY points serving as the key to activating consumer engagement. Customers can use FLY points to redeem items like cold brew coffee and receive membership rewards. This model helps small businesses such as local coffee shops and pizza parlors increase customer loyalty, while also giving consumers tangible rewards for supporting small businesses.

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

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

Therefore, for arcade tokens, collectible tokens, and other non-speculative digital assets, it must be clear that they should not be conflated with financial instruments. However, it is all too common for states to use a single term like "financial asset" to refer to all types of tokens. The resulting unintended consequence is that individuals and businesses using non-financial tokens are required to comply with regulatory rules designed for financial institutions.

Laws that misclassify tokens, or attempt to define all tokens by a single standard, inevitably lead to improper regulation. The consequences can be perplexing.

Imagine if a coffee shop owner had to apply for a financial services license to launch a points rewards program for customers, or if a musician had to get approval from the local financial regulator to issue a token representing ownership of a new single. Such requirements not only burden small businesses, artists, and users, but also do nothing to protect consumer rights. The crypto industry needs reasonable policies and regulations to thrive, which means rules must address real risks rather than drag down the businesses and creators truly driving national growth and innovation.

The Digital Assets and Consumer Protection Act (DACPA), signed into law by Illinois Governor Pritzker in August 2025, is a model of proper token treatment at the state level. The act recognizes that different tokens carry different risks and provides financial regulatory exemptions for tokens used for non-financial, non-speculative purposes, such as arcade tokens and collectibles, because they do not involve the risks the regulatory system is designed to prevent. States should follow Illinois’ example and legislate to ensure proper classification and differentiated treatment of tokens.

3: Establishing Blockchain Task Forces

The frequent emergence of conflicting state laws has created a patchwork of contradictory regulations, building barriers for large companies with compliance resources while making it difficult for small tech firms to survive. Fortunately, federal legislation has largely eliminated the need for states to develop comprehensive crypto regulatory systems on their own. But on certain specific issues, states should continue to play, in the words of Justice Louis D. Brandeis, the role of “laboratories” for policy innovation.

The first step in deciding whether and how to conduct state-level experiments is to establish a blockchain task force. Task forces provide states with an important platform for information sharing between the public and private sectors. These bodies, composed of both government and industry representatives, can help governors and legislatures fully understand the use cases, advantages, risks, and the impact of federal policy on their state agendas, while also providing a basis for policy coordination between states.

A typical example of a state-level blockchain task force is the California Blockchain Working Group. In 2018, California enacted AB 2658, directing the Secretary of the Government Operations Agency to appoint a blockchain working group and chairperson to assess the use cases, challenges, opportunities, and legal impacts of blockchain technology.

This 20-member expert panel 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 Projects

State governments can also pilot blockchain applications in the public sector to promote responsible crypto innovation and solve real-world problems. These pilot projects serve a dual purpose: raising awareness of the technology’s broad utility and demonstrating its practical benefits for government operations. The benefits of public sector blockchain initiatives are not limited to a single pilot project. By learning through practice, state agencies can deepen their understanding of the technology and use these experiences to inform state-level policy making.

Excellent examples of public sector blockchain applications already exist. The California working group’s report was not just theoretical; its research has led to several state-level pilot projects. For example, the Department of Motor Vehicles is using blockchain technology to digitize car titles to prevent fraud and increase efficiency; Utah has legislated to require the state’s technology services department to pilot blockchain-based digital credentials for public projects. Other use cases include providing mobile blockchain voting for overseas voters, publishing government spending data on public blockchains to increase transparency, and using verifiable health credentials to communicate medical test results while protecting privacy.

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

5: Using Stablecoins and Establishing GENIUS-Compliant State Issuance Regimes

Stablecoins represent a major opportunity to attract a billion users to crypto. Globally, they will enable faster, cheaper, and programmable payments.

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

In addition to using stablecoins to optimize government programs, states can also establish stablecoin issuance regimes tailored to local needs: while the GENIUS Act sets national standards for payment stablecoin issuers, it still preserves a state-level licensing pathway for issuers with less than $10 billion in issuance and whose state regulatory frameworks are substantially similar to federal standards.

It will take time to clarify the specific meaning of “substantially similar.” The Payment Stablecoin Act, which has passed both houses of Congress with broad bipartisan support, sets high standards for stablecoin issuers, including asset backing and transparency requirements, strict anti-money laundering, and customer identity verification rules. The act will take effect in January 2027, or four months after the main federal stablecoin regulator issues final rules (whichever comes first). During this period, federal agencies will refine the implementation details of the act, including the specific requirements that state regimes must meet or exceed federal standards. As the federal government advances the implementation of the act, states can begin to consider whether to adjust or upgrade their local stablecoin legislation.

The GENIUS Act makes clear that states must meet federal regulatory requirements for stablecoin issuers, but the law allows local governments to participate in policy making and jointly shape the future development of digital currency.

Stablecoins provide states with another opportunity to serve as “laboratories,” allowing them to experiment with different stablecoin issuance mechanisms to meet local needs. States such as California have already enacted stablecoin-related legislation, and Wyoming has even launched its own native stablecoin—the “Frontier Stable Token.”