a16z: How Can U.S. States Promote Responsible Crypto Innovation?

Authors: Aiden Slavin, Kevin McKinley, Policy Partner at a16z crypto and Partner on a16z's Government Affairs team, respectively

Translation: Luffy, Foresight News

Crypto legislation at the U.S. federal level is advancing rapidly. In just the past three months, President Trump signed the GENIUS Act (Guidance for Establishing National Innovation in Stablecoins), and the House passed the landmark Digital Asset Market Structure Clarification Act (CLARITY Act) with overwhelming bipartisan support.

But the federal government isn't the only entity working to regulate the crypto industry. In 2024, 27 U.S. states and Washington D.C. enacted 57 crypto-related bills.

While federal legislation significantly reduces the need for states to build comprehensive crypto regulatory frameworks independently, states can still play an active role in promoting responsible crypto innovation.

Below are five targeted, proactive measures—based on real-world examples—to help states protect citizens and support local blockchain businesses.

1. Adopt DUNA

Unlike traditional companies, decentralized blockchain networks lack a board of directors or CEO. Instead, they aim to distribute governance power to users through decentralized autonomous organizations (DAOs), eliminating centralized control.

Without DAOs, blockchain networks could fall under centralized control, mirroring today’s feudal internet dominated by a few giants like Meta, Google, and Amazon. These centralized, extractive entities harm both users and innovation. If big tech ultimately controls blockchain networks, Web3—the blockchain-based internet—could repeat the current web’s problems: surveillance, cybercrime, censorship, and value extraction.

By empowering users to govern blockchain networks, DAOs can fulfill the internet’s original vision: open, decentralized, and user-controlled. Yet today’s DAOs face significant challenges and have become targets of legal and regulatory actions. Last year, a court ruled that participating in a DAO—including posting on public forums—could make members legally liable for others’ actions under general partnership law. This creates major legal risks for DAO participants and fundamentally undermines the viability of the DAO model. Additionally, DAOs face practical but damaging hurdles, such as being unable to sign contracts with third parties.

Luckily, solutions exist. In March 2024, Wyoming became the first U.S. state to pass the Decentralized Unincorporated Nonprofit Association Act (DUNA). This law allows blockchain networks to comply with regulations while remaining decentralized: it grants DAOs legal recognition, enabling them to enter contracts, sue or be sued, pay taxes, and providing core liability protection for members against others’ actions. In short, DUNA places DAOs on equal legal footing with traditional corporate structures like LLCs.

DUNA’s impact is growing. Just last month, Uniswap DAO overwhelmingly approved (52,968,177 votes in favor, 0 opposed) adopting DUNA in Wyoming as its governance protocol’s legal structure. This allows Uniswap to retain decentralization while hiring service providers and meeting regulatory requirements. New blockchain projects are increasingly adopting this framework.

The broader DUNA’s adoption, the better positioned DAOs are to compete with corporate-controlled centralized networks, helping build an open, user-controlled internet. Wyoming’s pioneering DUNA law was developed over years of practice, including its prior Unincorporated Nonprofit Association (UNA) law. States with functional UNA frameworks can unlock Web3 potential by adopting DUNA. Together, these states can accelerate the return of crypto businesses to the U.S. and solidify America’s position as a global crypto leader.

2. Ensure existing laws don’t misclassify or improperly regulate tokens

Tokens are data records indicating quantities, permissions, and more. Unlike ordinary digital records, tokens reside on decentralized blockchains and can only be modified according to pre-defined rules enforced by autonomous software beyond anyone’s control. This enables tokens to confer “enforceable digital property rights” to holders.

Though we categorize tokens into seven types, their use cases are virtually limitless. Contrary to the common misconception that “tokens are just meme coins or Bitcoin-like assets for trading,” many token types lack financial characteristics. Take utility tokens: as the name suggests, they resemble traditional arcade tokens, serving purely functional roles within specific systems (e.g., a game), not speculation or investment. Examples include “digital gold in virtual worlds” or “loyalty points in membership programs.”

For example, Blackbird, a dining loyalty app, issues utility tokens called FLY to reward customers and distribute revenue to restaurants. Customers use FLY to buy cold brew coffee or earn loyalty rewards, giving local cafes and neighborhood pizzerias tools to retain customers while rewarding those who support small businesses.

Like utility tokens, collectible tokens are also non-financial. Often called non-fungible tokens (NFTs), their utility stems from recording ownership of unique items or rights—a collectible token might represent a song, concert ticket, or any other distinct asset or privilege.

Clearly, dining points and songs aren’t financial instruments like corporate stocks or bonds; neither utility nor collectible tokens promise or imply financial returns. Numerous other non-speculative tokens exist, such as identity credentials or in-game assets.

Thus, it’s crucial not to conflate utility tokens, collectible tokens, and other non-speculative digital assets with financial instruments. Unfortunately, many states use broad financial asset definitions that encompass all tokens, subjecting individuals and businesses using non-financial tokens to regulations meant for financial institutions.

Laws that misclassify tokens—or worse, apply a single definition to all tokens—inevitably lead to inappropriate regulation, with potentially absurd outcomes.

Imagine: a coffee shop owner needing a financial services license just to run a points program; a musician needing to consult financial regulators before issuing a token representing ownership of their new song. Such requirements impose heavy burdens on small businesses, artists, and users—not necessary for consumer protection. The thriving crypto sector needs sound policy and regulation, but rules must target actual risks, not stifle enterprises and creators driving state economic growth and innovation.

Illinois’ Digital Assets and Consumer Protection Act (DACPA) is a model of sensible state-level token regulation. Signed by Governor Pritzker in August 2025, DACPA recognizes varying token risks and explicitly exempts businesses using utility tokens, collectible tokens, and other non-speculative tokens from financial regulation, as these tokens pose none of the risks financial oversight aims to address. Other states should follow Illinois’ lead to ensure proper classification and regulation of tokens.

3. Establish blockchain task forces

Conflicting state laws create a patchwork of contradictory rules, advantaging well-resourced corporations while burdening small tech firms. Fortunately, federal legislation has largely eliminated the need for states to build comprehensive crypto frameworks independently. Still, following Justice Louis D. Brandeis’ metaphor, states should remain laboratories for policy innovation on specific issues.

When deciding whether and how to conduct policy experiments, establishing a blockchain task force is an excellent first step. Task forces provide valuable public-private information sharing: composed of government officials and industry experts, they can advise governors and legislatures on blockchain applications, benefits, risks, federal policy impacts, and inter-state coordination.

California’s Blockchain Working Group is a prime example of a state-level crypto task force. In 2018, California passed AB 2658, requiring the Secretary of Government Operations to appoint a blockchain technology task force and chair to assess blockchain use cases, challenges, opportunities, and legal implications.

The 20-member group included experts across technology, business, government, law, and cybersecurity. Two years later, it delivered a report to the legislature with policy recommendations and proposals for adapting existing laws to blockchain’s unique needs.

4. Pilot public-sector blockchain use cases

States can further responsible crypto innovation by testing blockchain applications in the public sector to solve real-world problems. These pilots serve dual purposes: they demonstrate blockchain’s broad practicality to the public and showcase tangible improvements in government efficiency. Benefits extend beyond individual pilots: as state agencies gain hands-on experience, they develop deeper technical understanding to inform state policy.

Several successful public-sector blockchain pilots already exist. California’s task force didn’t stop at theory—its findings led to multiple state pilots, such as the DMV using blockchain to digitize car titles, reducing fraud and improving efficiency. Utah passed legislation requiring its technology services department to pilot blockchain-based credentials for public projects. Other use cases include blockchain-based mobile voting for overseas voters, publishing state spending records on public blockchains for transparency, and using verifiable health credentials to share medical test results privately.

By piloting and scaling such applications, states deepen their understanding of blockchain use cases while delivering tangible benefits to citizens through improved government services.

5. Adopt stablecoins and build state-issued systems under the GENIUS Act

Stablecoins offer a reliable gateway to crypto for one billion people. Globally, they will enable faster, cheaper, programmable payments.

States too can benefit from digital dollars. Stablecoins can streamline government procurement and grant disbursements, lowering costs, increasing efficiency, and enhancing auditability. As long as states adopt privacy-preserving designs to protect citizen data, these initiatives can deliver win-win outcomes for governments and residents.

Beyond optimizing government programs with stablecoins, states can also participate in building stablecoin issuance systems tailored to local needs. While the GENIUS Act sets national standards for payment stablecoin issuers, it reserves space for state-level licensing—provided the issuer’s outstanding supply is under $10 billion and the state system is broadly consistent with federal rules.

Defining “broadly consistent” will take time. The GENIUS Act, backed by strong bipartisan support in Congress, sets strict standards for stablecoin issuers, including asset backing, transparency, and robust anti-money laundering (AML) and know-your-customer (KYC) compliance. The law takes effect in January 2027 or four months after the primary federal regulator releases final rules—whichever is later. During this period, federal agencies will clarify implementation details, including what state systems must do to meet or exceed federal standards. While the federal government advances GENIUS implementation, states can begin assessing whether to adjust or advance local stablecoin legislation.

The GENIUS Act clearly states: if states regulate stablecoin issuers, they must meet federal requirements. But it also allows local governments to shape the future of digital dollars through policy.

Stablecoins offer states another chance to act as policy labs, piloting different issuance models based on local needs. California has already passed stablecoin-related legislation; Wyoming even launched its own state-backed stablecoin, Border Stable Token.

Conclusion

With federal crypto regulations taking shape, states may no longer need to build comprehensive regulatory frameworks independently. Yet their role remains vital. By implementing targeted, practical measures, states can drive responsible crypto innovation and ensure citizens and local businesses share in the benefits of the internet’s future.