By Aiden Slavin & Kevin McKinley, a16z; Translated by Tim, PANews. Federal crypto legislation in the United States is advancing rapidly. In the past three months, President Trump signed the Guiding and Establishing a National Innovation for Stablecoins (GENIUS Act), and the House of Representatives passed the landmark Digital Asset Market Clarity Act (CLARITY Act) with overwhelming bipartisan support. However, the federal government isn't the only legislature seeking to set the rules of the road for the crypto industry. In 2024, 27 states and Washington, D.C. passed a total of 57 crypto-related bills. While federal legislation, focused on protecting consumers, providing regulatory clarity, and encouraging innovation, has significantly reduced or even eliminated the need for states to implement comprehensive crypto regulation on their own, states can still play an active role in promoting responsible crypto innovation. The following details five targeted, proactive measures, based on real-world examples, that governments can take to protect their citizens and support the development of local blockchain companies. 1: Adopt DUNA Unlike corporations, decentralized blockchain networks don't have boards of directors or CEOs. Their goal is to put governance in the hands of users through decentralized autonomous organizations (DAOs, pronounced "dow"), eliminating centralized control mechanisms. Without DAOs, blockchain technology risks being enslaved by centralized forces, which have created today's internet feudalism—a governance model dominated by a few giants: the kingship of companies like Meta, Google, and Amazon. These exploitative, centralized corporations are detrimental to both users and innovation. If tech giants ultimately gain control of blockchain networks, the blockchain-based internet (sometimes referred to as "Web3") is likely to repeat the problems of the existing online space: rampant surveillance, cybercrime, content censorship, value extraction, and other drawbacks are inevitable. By empowering users to govern blockchain networks, DAOs help fulfill the original promise of the internet: openness, decentralization, and user autonomy. However, DAOs face numerous challenges, and some have recently become targets of legal and regulatory action. Just last year, a court ruled that any action taken by a DAO (including posting on public forums) could make members liable for the actions of other members under general partnership law. This creates significant legal risks for DAO members and generally undermines the viability of the organizational form. DAOs also face more common, but still pernicious, obstacles, such as the inability to enter into contracts with third parties. Fortunately, solutions to these problems exist. In March 2024, Wyoming became the first state in the United States to pass the Decentralized Unincorporated Nonprofit Association Act. This bill allows blockchain networks to maintain their decentralized nature while complying with the law. It grants decentralized autonomous organizations (DAOs) legal status, allowing them to enter into contracts with third parties, defend themselves in court, and meet tax obligations, while also providing key legal protections for their members. In short, the bill gives DAOs the same legal standing as other corporate forms, such as limited liability companies. The development of decentralized nonprofit associations (DUNAs) is accelerating. Just last month, the Uniswap DAO (the governing body of the popular DeFi protocol of the same name) overwhelmingly voted (52,968,177 in favor to 0 against) to adopt a Wyoming-registered DUNA as the legal structure for the Uniswap governance protocol. This legal structure will allow Uniswap to maintain its decentralized governance while retaining its service provider functions and meeting regulatory requirements. Many newly launched projects have also begun adopting this legal framework. As the DUNA framework becomes more widespread, DAOs will be better positioned to transcend corporate networks and contribute to an open, user-driven internet. Wyoming's groundbreaking DUNA legislation builds on years of exploration, including the state's earlier UNA legislation. Other states with mature UNA frameworks can also unleash the potential of Web3 by adopting the DUNA model. These combined forces will accelerate the end of the current overseas migration of the crypto industry and solidify the United States' position as a global leader in the crypto industry. 2. Ensure that existing laws do not misclassify tokens, leading to unfair treatment. Tokens are data indexes that record information such as quantity and permissions. Unlike ordinary digital records, tokens exist on a decentralized blockchain, and their changes must follow pre-set rules. These rules are enforced by autonomous software without human control, allowing tokens to grant holders enforceable digital property rights. While we've categorized tokens into seven broad categories, the application scenarios for tokens are truly endless. Despite a common misconception that tokens are simply meme coins used for transactions or financial assets like Bitcoin, many common token types don't actually possess financial attributes. Take game tokens, for example. As the name suggests, these tokens, like the metal tokens of old arcades, provide practical functions within a specific system like gaming and aren't designed for speculation or investment. Typical examples include digital gold in virtual worlds and reward points within membership programs. For example, the restaurant membership app Blackbird connects merchants and customers through a points system, with its exclusive FLY points system becoming the key to activating consumer engagement. Customers can redeem FLY points for items like cold brew coffee and earn membership rewards. This model not only helps small businesses like local cafes and street-side pizza shops retain customers, but also allows consumers to receive tangible rewards for supporting small businesses. Similar to arcade game coins, collectible tokens are not considered financial instruments. These tokens, often called "non-fungible tokens" (NFTs), serve as proof of ownership or a right to an object. A collectible token can represent ownership of a song, a concert ticket, or any other unique item or right. Obviously, restaurant points and songs are not financial instruments like company stocks or bonds; arcade game coins and collectible tokens do not offer, promise, or imply a financial return. There are also numerous examples of non-speculative tokens, ranging from identity credentials to in-game assets. Therefore, it is important to clarify that arcade game coins, collectible tokens, and other non-speculative digital assets should not be conflated with financial instruments. However, it is not uncommon for states to use a single term, such as "financial asset," to refer to all types of tokens. This has the unintended consequence of subjecting individuals and businesses using non-financial tokens to regulations designed for financial institutions. Laws that misclassify tokens, or even attempt to define all tokens with a single standard, inevitably lead to inappropriate regulation. The consequences can be puzzling. Imagine if a coffee shop owner had to apply for a financial services license to launch a points-based rewards program for customers, or if a musician had to obtain approval from local financial regulators to issue a token representing ownership of their new single. Such requirements would not only burden small businesses, artists, and users, but also undermine consumer protection. The crypto industry needs sound policies and regulations to thrive, requiring rules that address real risks rather than hinder the businesses and creators that truly drive national growth and innovation. The Digital Asset and Consumer Protection Act (DACPA), signed into law by Illinois Governor Pritzker in August 2025, is an example of state-level legislation that properly addresses tokens. The bill recognizes that different tokens present different risks and provides financial regulatory exemptions for tokens used for non-financial speculative purposes, such as arcade game coins and collectible tokens, because these tokens don't involve the risks the regulatory system is designed to protect against. States should follow Illinois' lead and pass legislation to ensure that tokens are appropriately classified and treated differently.
3: Establish a Blockchain Task Force
The frequent occurrence of conflicting state laws has created a patchwork of contradictory regulations, creating barriers for large companies with the regulatory resources and making it difficult for smaller tech companies. Thankfully, federal legislation has largely eliminated the need for states to develop their own comprehensive crypto regulatory systems. However, on certain specific issues, states should continue to serve as, to borrow Justice Louis D. Brandeis's metaphor, "laboratories" for policy innovation.
A first step in determining whether and how to conduct national experiments is to establish a blockchain task force. By establishing a public-private information-sharing mechanism, the working group provides an important communication platform for states. This body, comprised of both government and industry professionals, can help governors and legislatures gain a comprehensive understanding of blockchain technology's application scenarios, advantages and risks, and the impact of federal policies on their state's agenda. It also provides a basis for decision-making for interstate policy coordination. A typical example of a state-level blockchain working group is the California Blockchain Working Group. In 2018, California enacted AB 2658, directing the Secretary of the State Government Operations Office to appoint a blockchain working group and its chairperson to assess the application scenarios, challenges and opportunities, and legal implications of blockchain technology. This 20-member expert panel represents a multidisciplinary field, including experts in technology, business, government, law, and information security. Two years later, the panel 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 Pilot Applications State governments can also pilot blockchain applications in the public sector to promote responsible cryptographic innovation and solve real-world problems. These pilot projects serve a dual purpose: raising awareness of the technology's broader utility and demonstrating its practical benefits to government operations. The benefits of public sector blockchain initiatives extend beyond a single pilot project. Through hands-on learning, state agencies can enhance their understanding of the technology and use these lessons to inform state policy. Excellent examples of public sector blockchain applications already exist. The California task force's report is more than just theoretical; its findings have already spawned several state-level pilot projects. For example, the Department of Motor Vehicles is using blockchain technology to digitize car titles to prevent fraud and improve efficiency. Utah has passed legislation requiring the state's Department of Technology Services to conduct a pilot program for blockchain-based digital credentials for public projects. Other use cases include providing mobile blockchain voting for overseas voters, publishing government spending data on a public blockchain to enhance transparency, and communicating medical test results in a privacy-preserving manner through verifiable health credentials. By piloting and scaling these applications, countries can better understand blockchain's use cases and benefit their citizens through improved government services. 5: Use stablecoins and establish GENIUS-compliant national issuance systems. Stablecoins represent a significant opportunity to attract a billion users to the crypto space. They will enable faster, cheaper, and programmable payments globally. States can also benefit from a digital dollar. Stablecoins can streamline government procurement and payment processes by reducing costs, increasing efficiency, and strengthening auditability. As long as states adopt privacy-preserving methods to ensure the security of citizen data, these projects can benefit both governments and citizens. In addition to leveraging stablecoins to optimize government programs, states can also tailor their stablecoin issuance regulations to local needs. While the GENIUS Act establishes national standards for payment stablecoin issuers, it also preserves a state licensing path for issuers with issuance volumes under $10 billion and whose state regulatory frameworks are substantially consistent with federal standards. Clarification of the specific meaning of "substantially similar" will take time. The Payment Stablecoin Act, which passed the House and Senate with broad bipartisan support, sets high standards for stablecoin issuers, including asset backing and transparency requirements, and strict anti-money laundering and customer identity verification regulations. The bill will take effect in January 2027, or four months after the lead federal stablecoin regulator issues final regulations, whichever comes first. During this period, federal agencies will refine the bill's implementation details, including specific requirements for state regulations to meet or exceed federal standards. While the federal government advances the bill, states can begin to examine whether their local stablecoin legislation needs to be adjusted or updated. The GENIUS Act explicitly states that states must meet federal regulatory requirements for stablecoin issuers, but the law allows local governments to participate in policymaking and jointly shape the future development of digital currencies. Stablecoins offer states another opportunity to serve as "laboratories," allowing them to experiment with different stablecoin issuance mechanisms to meet local needs. States like California have already enacted stablecoin regulations, and Wyoming has even launched its own stablecoin, the "Frontier Stable Token."
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