a16z: As the federation rapidly advances, a detailed explanation of five key state-level measures to promote encryption innovation.

Authors: Aiden Slavin & Kevin McKinley, a16z

Compiled by: Tim, PANews

The U.S. federal cryptocurrency legislation is advancing rapidly. In the past three months, President Trump has signed the "Guiding and Establishing the U.S. Stablecoin National Innovation Act" (GENIUS Act), and the House of Representatives has overwhelmingly passed the landmark "Digital Asset Market Clear Act" (CLARITY Act) with bipartisan support.

But the federal government of the United States is not the only legislative body seeking to set the rules of the road for the cryptocurrency industry. In 2024, 27 states and Washington D.C. in the U.S. passed a total of 57 cryptocurrency-related bills.

Although federal legislation, which focuses on protecting consumers, providing regulatory clarity, and encouraging innovation, has significantly reduced or even completely eliminated the necessity for states to implement comprehensive cryptocurrency regulations on their own, states can still play an active role in promoting responsible crypto innovation.

The following text will detail five targeted proactive measures, all based on real cases, which governments around the world can use to ensure citizen safety and support the development of local blockchain enterprises.

1: Use DUNA

Unlike traditional enterprises, decentralized blockchain networks do not have a board of directors or a CEO. Their goal is to transfer governance power to users through Decentralized Autonomous Organizations (DAOs, pronounced like "dow"), thereby eliminating centralized control mechanisms.

Without DAO, blockchain technology may be engulfed by centralized forces, which have led to today's internet feudalism, a governance model dominated by a few giants: the reign of companies like Meta, Google, Amazon, and others. These centrally-controlled enterprises have an exploitative nature and are detrimental to both users and innovation. If tech giants ultimately take control of the blockchain network, then the blockchain-based internet (sometimes referred to as "Web3") is likely to repeat the mistakes of the existing cyberspace: rampant surveillance, cybercrime, content censorship, value extraction, and various other issues will inevitably resurface.

By empowering users with governance rights over the blockchain network, DAOs help realize the internet's original promise: open, decentralized, and user-controlled. However, DAOs face numerous challenges today, with some organizations even becoming targets of legal and regulatory actions recently. Just last year, a court ruled that any actions taken as part of a DAO (including posting on public forums) could potentially expose its members to legal liability for the actions of other members under general partnership law. This brings significant legal risks to DAO members, overall weakening the viability of this organizational form. DAOs also face more common but still harmful obstacles, such as the inability to enter contracts with third parties.

Fortunately, there are solutions to these problems. In March 2024, Wyoming became the first state in the U.S. to pass the "Decentralized Non-Registered Non-Profit Association Act." This act allows blockchain networks to maintain their decentralized characteristics while complying with the law, granting decentralized autonomous organizations legal entity status, allowing them to enter into contracts with third parties, appear in court, fulfill tax obligations, and provide essential legal protections for members. In short, this act gives decentralized autonomous organizations the same legal status as other business forms such as limited liability companies.

The development of the Decentralized Non-Profit Association (DUNA) is accelerating. Just last month, the Uniswap DAO (the governing body of the widely popular DeFi protocol of the same name) passed a resolution with an overwhelming advantage (52,968,177 votes in favor, 0 votes against) to adopt the DUNA registered in Wyoming as the legal framework for the Uniswap governance protocol. This legal structure will allow Uniswap to maintain its decentralized governance framework while retaining service providers and meeting regulatory requirements. Many newly launched projects are also beginning to adopt this legal framework.

As the DUNA framework becomes more popular, DAOs will be able to better transcend corporate networks and help create an open, user-led internet. Wyoming's groundbreaking DUNA legislation is built on years of exploration, including the UNA regulations passed in the state in its early years. Other states with mature UNA legal frameworks can also unleash the development potential of Web3 by adopting the DUNA model. These combined efforts will accelerate the end of the trend of the crypto industry migrating overseas and solidify the United States' position as the global leader in the crypto industry.

2. Ensure that existing laws do not misclassify tokens, leading to improper treatment.

A token is a data index that records information such as quantity and permissions. The difference from ordinary numerical records is that since tokens exist on a decentralized blockchain, their changes must follow predefined rules. These rules are executed by autonomous software that is not controlled by anyone, allowing tokens to grant holders enforceable digital property rights.

Although we have categorized them into seven major categories, the application scenarios of tokens are actually endless. While people generally misunderstand that tokens are merely Meme coins used for trading or financial assets similar to Bitcoin, in reality, many common types of tokens do not possess financial attributes. Take game tokens as an example; as the name suggests, these tokens are like the old metal tokens in arcade halls, providing practical functions within specific systems such as games, and they are not designed for speculation or investment. Typical examples include digital gold in virtual worlds and reward points in membership programs.

For example, the dining membership app Blackbird connects merchants and customers through a points system, with its exclusive points FLY becoming the key to activating consumer interaction. Customers can use FLY points to redeem products like cold brew coffee and receive membership rewards. This model not only helps local coffee shops and small merchants like street pizza stores enhance customer loyalty but also allows consumers to receive tangible returns while supporting small businesses.

Similar to arcade game coins, collectible tokens are also not financial instruments. These tokens, commonly referred to as "non-fungible tokens" (NFTs), primarily serve as proof of ownership of an item or a right. A collectible token can represent ownership of a song, a concert ticket, or proof of ownership of any unique item or privilege.

Clearly, restaurant points and songs are not financial instruments like company stocks or corporate bonds; arcade game tokens and collectible tokens neither provide nor have promised or implied financial returns. Additionally, there are numerous examples of non-speculative tokens, ranging from identity credentials to in-game assets.

Therefore, for arcade game coins, collectible tokens, and other non-speculative digital assets, it must be clear that they should not be conflated with financial instruments. However, it is not uncommon to see states using the single term "financial assets" to refer to all types of tokens. The improper consequence arising from this is that individuals and businesses using non-financial attribute tokens are required to comply with regulatory rules designed for financial institutions.

Misjudging the legal classification of tokens, or even attempting to define the law for all tokens using a single standard, will inevitably lead to improper regulation. The consequences arising from this may be perplexing.

Imagine if a coffee shop owner had to apply for a financial service license to launch a rewards points program for customers, or if a musician had to obtain approval from local financial regulators to issue tokens representing ownership of their new single. Such requirements not only burden small businesses, artists, and users, but also do not benefit consumer rights protection. The crypto industry needs reasonable policies and regulations to thrive, which means the rules must address real risks rather than hinder those enterprises and creators that truly drive national growth and innovation.

In August 2025, Illinois Governor Pritzker signed into law the Digital Assets and Consumer Protection Act (DACPA), which serves as a legislative model for properly addressing tokens at the state level. The law recognizes that different tokens come with different risks, and it establishes financial regulatory exemptions for tokens used for non-financial speculative purposes, such as arcade tokens and collectible tokens, as they do not involve the risks that this regulatory system aims to prevent. States should follow Illinois' example and ensure proper classification and treatment of tokens through legislation.

3: Establishment of a Special Working Group for Blockchain

The frequent emergence of conflicting state laws has given rise to a patchwork regulatory network composed of contradictory rules, creating barriers for large enterprises with compliance resources while making it difficult for small tech companies. Fortunately, federal legislation has largely eliminated the need for states to independently develop comprehensive cryptocurrency regulatory frameworks. However, in regard to certain specific issues, states should continue to maintain their role as "laboratories" for policy innovation, borrowing the metaphor from Justice Louis D. Brandeis.

When deciding whether and how to conduct national-level experiments, the first step is to establish a blockchain working group. The working group provides an important communication platform for states by establishing a public-private information sharing mechanism. This institution, composed of both government and industry professionals, can help governors and legislative bodies comprehensively understand the application scenarios, advantages, risks of blockchain technology, and the impact of federal policies on their state agendas, while also providing decision-making basis for policy coordination among states.

A typical example of a state-level blockchain working group is the California Blockchain Working Group. In 2018, California enacted AB 2658, which tasked the Secretary of the State Government Operations Agency with appointing the blockchain working group and its chair, responsible for assessing the application scenarios, challenges and opportunities, legal impacts, and more of blockchain technology.

This expert group, consisting of 20 members, represents various disciplines, including experts in technology, business, government, law, and information security. Two years later, the group submitted a report to the legislative body, which included policy recommendations and proposals to adapt existing laws to the specific needs of blockchain.

4: Pilot Cases of Public Sector Blockchain Applications

State governments can also pilot blockchain applications in the public sector to promote responsible crypto innovation and address real-world issues. These pilot projects serve a dual purpose: enhancing public awareness of the technology's wide-ranging utility and demonstrating its practical benefits for government operations. The benefits of blockchain initiatives in the public sector extend beyond any single pilot project. State government agencies can enhance their understanding of the technology through practical experience, and subsequently use this knowledge to inform the development of state-level policies.

Excellent examples of blockchain applications in the public sector already exist. The report from the California working group is not just theoretical; its research findings have led to the initiation of several state-level pilot projects. For instance, the Department of Motor Vehicles utilizes blockchain technology to digitize vehicle ownership to prevent fraud and enhance efficiency; Utah has legislated to require the state technology services department to conduct pilot projects for digital credentials based on blockchain. Other application scenarios include providing mobile blockchain voting for overseas voters, publishing government spending data on public chains to enhance transparency, and communicating medical test results through verifiable health credentials to protect privacy.

By piloting and promoting these applications, countries can better understand the application scenarios of blockchain, while also benefiting the public by improving government services.

5: Use stablecoins and establish a national issuance system that complies with GENIUS.

Stablecoins represent a significant opportunity to attract a billion users into the crypto space. Globally, they will enable faster, cheaper, and programmable payment methods.

States can also benefit from the digital dollar. Stablecoins can optimize these processes by reducing the costs of government procurement and payment projects, improving their efficiency, and enhancing auditability. As long as states adopt privacy-preserving methods to ensure the security of citizens' data, these projects can bring convenience to both the government and residents.

In addition to optimizing government projects using stablecoins, states can also develop stablecoin issuance systems based on local needs: although the GENIUS Act sets national standards for payment stablecoin issuance institutions, it still maintains a state-level licensing pathway for issuance institutions whose issuance does not exceed $10 billion and whose state regulatory framework is basically consistent with federal standards.

The specific meaning of "material similarity" still requires time to clarify. The "Payment Stablecoin Act" has been passed after receiving broad bipartisan support in both the House and Senate. This legislation sets high standards for stablecoin issuers, including requirements for asset backing and transparency, as well as establishing stringent anti-money laundering and customer identity verification rules. The Act will take effect in January 2027, or four months after the main federal stablecoin regulatory agency issues its final regulations (whichever comes first). During this period, federal agencies will refine the implementation details of the Act, including specific requirements for state systems to meet or exceed federal standards. While the federal government advances the implementation of the Act, states may begin to study whether they need to adjust or upgrade their local stablecoin legislation.

The GENIUS Act clearly states that states must meet the federal framework's regulatory requirements for stablecoin issuers, but the law allows local governments to participate in policy-making, jointly shaping the future development of digital currencies.

Stablecoins provide states with another opportunity to become "laboratories," allowing them to experiment with different stablecoin issuance mechanisms to meet local demands. States like California have enacted regulations related to stablecoins, and Wyoming has even launched a native stablecoin — "Frontier Stable Token."