House committee advances bill to clarify digital-asset rules in Kentucky, removes mining language

House Bill 701, sponsored by State Representative Adam Bowling, passed the House Standing Committee on Banking and Insurance on a voice and roll-call vote after the committee adopted a substitute that removed a proposed mining provision and added a sentence clarifying that the law will not require any person to accept digital assets as payment.

The bill aims to give Kentucky statutory definitions governing “digital assets” and to make clear that certain digital-asset activities are not securities so they fall outside securities regulation. Representative Adam Bowling, the bill’s sponsor, told the committee the measure is intended to “modernize and move Kentucky forward with regards to digital assets and blockchain technology” and to “protect monetary freedom and prevent outdated regulations from stifling innovation and commerce.”

Supporters said the changes adopted in the committee substitute narrow the original proposal by removing the mining section, keeping the bill focused on definitions, a person’s right to hold and transact with digital assets, and language aimed at ensuring some digital-asset activity is treated as a commodity rather than a security. The substitute also added explicit language that “this section shall not require any person to accept digital assets for payment for legal goods or services,” a clarification Bowling said he wanted to make explicit in state law.

Ashley Gunn, who identified herself as overseeing state policy affairs for Coinbase, described the federal regulatory context and ongoing litigation. Gunn said the bill does not attempt to “explicitly” declare that digital assets are commodities, but that it does seek to identify pieces of activity that are not securities. Gunn told the committee that a federal enforcement case the Securities and Exchange Commission had advanced with respect to certain staking and infrastructure activities was dismissed the prior Friday and said that the SEC’s action “is no longer an issue.”

Committee members questioned whether the bill preempts local zoning or other local controls and asked why Kentucky should act ahead of federal regulators. Representative Auel asked why the committee was taking a position about whether digital assets are securities or commodities. Bowling and Gunn replied that federal debate has been ongoing for years and that several other states have already moved to provide state-level clarity; they argued that Kentucky should be prepared whenever federal market-structure rules are settled. Representative Hancock and others voiced concerns about money laundering and consumer protections; Gunn said Coinbase is subject to federal anti-money-laundering and know-your-customer requirements.

The committee adopted the substitute and then passed HB 701 as amended on a roll call. Recorded votes in the committee showed 17 yes votes and one member recorded as passing. The chair announced that the bill “does pass with favorable expression” and recommended the same on the House floor.

What the bill does not do, as adopted in committee, is enact the deleted mining provisions or impose any requirement that private businesses accept digital assets as payment. It also does not itself create a state-level markets regulator; sponsors said federal market-structure legislation or regulatory settlement would provide additional clarity later.

The measure will be scheduled next for consideration on the House floor, where members not on the committee will have another opportunity to debate or amend the bill.