Tennessee lawmakers are considering legislation that would allow the state to hold bitcoin as part of its public financial reserves.
If passed, the measure would place Tennessee among a small group of US states that have moved to formalize bitcoin holdings through statute.
House Bill 1695, known as Tennessee Strategic Bitcoin Reserve Actwas filed earlier this month by Rep. Jody Barrett (R-Dickson). The bill is scheduled for consideration during the current session of the 114th Tennessee General Assembly.
It would authorize the Treasury to invest a limited proportion of selected government funds in bitcoin.
The bill’s findings cite inflation as a key concern. Lawmakers state in the bill that rising prices erode the real purchasing power of assets held in the general fund, the revenue fluctuation reserve and other state pools.
Bitcoin is described in the legislation as a decentralized digital commodity with fixed supply and global liquidity. The bill argues that a financial investor can use such an asset to improve long-term, inflation-adjusted returns.
“This is about responsible stewardship of public finances,” Barrett said in a statement. He compared bitcoin to gold and framed it as a hedge against inflation.
Tennessee follows a growing wave of US states exploring Bitcoin-focused policies, with lawmakers in South Dakota and Kansas introducing bills that would allow public funds to be allocated to bitcoin or placed in a strategic Bitcoin and digital asset reserve.
At the same time, states such as Rhode Island and Florida have revived or reinstated legislation aimed at studying Bitcoin, facilitating its use or potentially adding it to state balance sheets under defined monitoring frameworks.
10% of Tennessee’s general fund for bitcoin
Under the proposal, the treasurer could allocate funds from the general fund, the revenue fluctuation reserve or other state funds approved by lawmakers. Bitcoin exposure will be limited to 10% of each Eligible Fund at the time of purchase.
Annual purchases will be limited to 5% per financial year until the ceiling is reached. The bill allows passive capital gains to push holdings above the cap without forcing sales.
The legislation limits investments to bitcoin only. It blocks allocations to other cryptocurrencies or digital assets. Bitcoin could be owned directly by the government, through a qualified custodian bank, or via an exchange-traded product tied exclusively to bitcoin.
All forms of exposure will count towards the same ceiling.
The bill sets out detailed standards for custody. A “secure storage solution” must store private keys in encrypted hardware that is stored offline in at least two locations. Access would require encrypted channels and multi-party authorization.
Audit logs would be mandatory. Custody systems will face annual third-party code reviews and penetration tests. Providers would need disaster recovery plans.
Consistent transparency checks
Transparency is a central element of the proposal. Every two years the treasurer must publish a public report. The report will indicate the amount of bitcoin held, its dollar value at the time of purchase and at the end of the period, and a summary of transactions.
It will also include a cryptographic proof that allows third parties to verify on-chain balances. Safety assessment summaries will be available upon request.
The bill also allows the treasurer to create a program to accept bitcoin for taxes, fees or other government obligations. Participation would be voluntary. Any bitcoin received will be transferred to the general fund and recorded at market value. Agencies will be reimbursed in dollars.
Supporters say the structure reflects Tennessee’s broader approach to asset management. The state oversees more than $132 billion in assets, including one of the top-rated public pension systems in the country.
“Even strong balance sheets face risks that traditional assets don’t hedge,” said David Birnbaum, president of the Tennessee Bitcoin Alliance. He said bitcoin offers diversification because of its low correlation with other asset classes.
The bill requires the treasurer to publish a bitcoin investment policy by January 1, 2027. A full performance and risk review is due by October 1, 2032.
Lawmakers would then decide whether to continue, revise or repeal the program.
If the law is approved, it will enter into force on July 1, 2026.