Connecticut has passed landmark legislation that makes it one of the most restrictive states in the U.S. when it comes to government involvement in cryptocurrency. House Bill 7082, titled “An Act Concerning the Regulation of Virtual Currency and State Investments,” was passed unanimously by both the House and the Senate. The law prohibits the state and its political subdivisions from accepting, holding, or investing in Bitcoin and other digital assets. It also introduces a broad set of regulations for crypto businesses operating within the state.

Key Provisions of the New Law

1. State Investment Ban on Cryptocurrency

Under HB 7082, Connecticut state and local governments are strictly prohibited from:

Accepting cryptocurrency as payment,

Requiring the use of virtual currencies for any transactions,

Holding or investing public funds in crypto assets,

Establishing any digital currency reserves.

This essentially blocks any public sector participation in the cryptocurrency market, positioning Connecticut as one of the first states to draw such a firm line.

2. New Restrictions for Crypto Remittance Businesses

The law sets significant restrictions on businesses involved in crypto-related money transmission. Any business that receives, sends, stores, or maintains custody of virtual currencies in Connecticut is subject to the following:

Use of Crypto Assets: These businesses may not use or transfer a customer’s crypto assets in any way unless explicitly directed by the customer.

Third-Party Custody: Businesses are prohibited from using third-party services to hold crypto on behalf of clients unless those entities are licensed money transmitters, qualified banks or credit unions, or have received explicit approval from the Connecticut Banking Commissioner.

Additionally, the law defines a “virtual currency control services vendor” as an entity that manages crypto on behalf of another business, emphasizing strict oversight on any service that might handle customer assets indirectly.

3. AML Compliance and Consumer Protection

Crypto businesses are required to comply with anti-money laundering (AML) regulations. The state now mandates that all crypto-related money transmitters must hold digital assets equivalent to what is owed to customers at all times, ensuring that customers’ funds are fully backed.

The law further clarifies that these virtual assets are considered the property of customers. If claims are made—such as during bankruptcy or legal disputes—the crypto must be distributed proportionally based on each customer’s entitlement.

4. Mandatory Transaction Disclosures

HB 7082 introduces specific disclosure requirements to ensure transparency in crypto transactions. Businesses must provide:

The nature and terms of the transaction,

The exchange rate and value in U.S. dollars,

All fees, commissions, or markups charged,

A detailed receipt that includes the business name, contact information, time and date of transaction, and complaint filing process.

These disclosures must be provided before and after the transaction, unless an alternative form is approved by the Banking Commissioner.

5. Restrictions on Accounts for Minors

The law also targets consumer protection for minors using money-sharing or crypto-related apps. Starting October 1, 2025, businesses will be barred from allowing anyone to open such accounts for individuals under 18 without obtaining a signed statement verifying that the individual is the minor’s parent or legal guardian.

Implications for the Crypto Industry in Connecticut

HB 7082 sends a clear message: Connecticut is taking a cautious and tightly regulated approach to cryptocurrency. While many states are exploring ways to incorporate crypto into their economies, Connecticut is choosing to distance itself from direct involvement, emphasizing consumer protection, financial transparency, and regulatory compliance.

The law creates both hurdles and clarity for businesses operating in the state’s crypto ecosystem. Companies will need to reassess their practices, particularly those that involve custody, third-party services, or transactions involving minors. But for regulators and residents, the goal is clear: to create a safer, more controlled environment for digital financial activity.

Conclusion

Connecticut’s sweeping crypto legislation may serve as a model for other states looking to enforce tighter regulations on digital assets. By banning state-level investment and establishing rigorous standards for private-sector crypto operations, HB 7082 marks a significant shift in how states may handle the fast-evolving world of digital currencies.