Jake Morabito & Alan Jernigan Testimony in Kansas: Digital Assets, Blockchain, and Cryptocurrency
ALEC Communications and Technology Senior Task Force Director Jake Morabito and Commerce, Insurance and Economic Development Task Force Director Alan Jernigan were recently invited to testify before the Kansas State Legislature Special Committee on Commerce regarding state cryptocurrency considerations.
Additional coverage was highlighted in a local news piece by WIBW News, covering highlights from their testimonies.
You can read both of their testimonies below and watch the recording here.
Chairman Tarwater, Vice Chair Alley, and Members of the Special Committee:
I am Alan Jernigan, Director of the Commerce, Insurance, and Economic Development Task Force at the American Legislative Exchange Council (ALEC). I appreciate the opportunity to speak with you today and share ALEC’s nonpartisan research and analysis on digital assets, blockchain, and cryptocurrency.
ALEC is a nonprofit, nonpartisan organization headquartered in Virginia, made up of state legislators from across the country. Our mission is to promote the principles of limited government, free markets, and federalism—core values that strengthen both states and their citizens. In support of your state’s efforts, I’ll be highlighting two key ALEC model policies developed by ALEC’s Commerce, Insurance and Economic Development (CIED) Task Force. These models can help Kansas build a forward-looking and resilient foundation for its digital economy.
The ALEC CIED Task Force is comprised of state legislators and policy experts that believe that overregulation of financial tools harms consumers and businesses alike. They believe these financial tools can open the doors of economic opportunity and should prioritize protecting consumer privacy.
Cryptocurrency is continuing its rise in our modern-day society. Bitcoin now has a market cap exceeding $2 trillion, higher than companies such as Meta and Tesla. You can use the currency in a similar manner to other purchasing options at retailers such as Home Depot and Whole Foods. It allows anyone in the world with internet connection to store and exchange value. Cryptocurrency is here to stay, and it has left federal and state governments to implement oversight.
With any emerging technology, there are always concerns about individuals that look to capitalize on these developing landscapes for their own nefarious intentions. There are currently many enforcement measures and laws that provide sound protection, but it is key for states to lead on the constantly changing landscape without stifling innovation.
As mentioned in previous presentations, many of the topics discussed today are issues being addressed at the federal level. This gives states like Kansas, an opportunity to become a national example of principled policy solutions that promotes limited government and free market solutions.
A CBDC, or a central bank digital currency, is not the same as other cryptocurrency which are decentralized forms of currency that are not issued by the government. A CBDC is a purely digital form of money that is issued, controlled, regulated by a central bank (the Federal Reserve in the case of the United States). It would be a direct liability of the Federal Reserve.
CBDCs would allow the Federal Reserve to increase surveillance on financial transactions and give the government unprecedented insight and control over the finances of Americans. In 2022, President Biden signed an Executive Order which called for the federal government to explore and research the potential use of a central bank digital currency. President Trump has since signed an executive order directing federal agencies to terminate CBDC initiatives. There is no guarantee that future administrations will hold the same stance.
Last year, the U.S. House passed the CBDC Anti-Surveillance State Act, which would have prohibited the Federal Reserve from directly or indirectly issuing a CBDC in the United States. At least nine states have followed Congress’ lead and passed reforms that prohibit CBDCs. There is an opportunity for additional states like Kansas to further protect their citizens financial privacy.
The ALEC Reject CBDCs and Protect Financial Privacy Act, one of the ALEC Essential Policy Solutions for 2025, opposes adopting and developing a CBDC and resolves that state agencies will not accept or require CBDC payments. This model policy protects the current banking and financial system, as well as the rights and liberties of individuals and businesses. Currently, private banks are regulated by market competition and government regulation. However, if we move towards a singular CBDC, this competition would dissipate into the hands of a singular institution.
The next model policy that I would like to discuss was a reform passed in Kansas earlier this year. ALEC named Representative Patrick Penn and Senator Stephen Owens as ALEC Policy Champions for their success in leading legislation that reduces barriers to innovation by bringing a universal regulatory sandbox program to Kansas. The ALEC Policy Champion award recognizes state legislators that advance policy solutions built on the pillars of free markets, limited government, and federalism in their states. This reform makes it easier for innovators and entrepreneurs to test products faster than current regulations allow, while protecting public health and safety.
Programs, like those enabled by the Kansas reform, have already seen success around the country. Arizona and Hawaii, for example, have successfully implemented regulatory sandboxes in the fintech space. In 2020, Hawaii created a regulatory sandbox known as the Digital Currency Innovation Lab. It was created to explore regulations and potential economic opportunities created by cryptocurrency. Following the conclusion of the sandbox in 2024, several recommendations ensured that focus on deregulation that help make Hawaii a more attractive destination for businesses.
Innovation leads to greater liberties and economic mobility and creates brand new technologies, some of which fall into heavily regulated fields. To ensure that innovation can occur, benefiting society as a whole, another of the ALEC Essential Policy Solutions for 2025, the ALEC Universal Regulatory Sandbox Act, like Kansas’ reform, establishes the framework for innovators, under the observation of regulators, to launch and trial innovative products, services, and models while temporarily bypassing laws or regulations that may conflict with the technology. This primes Kansas to be a leader in emerging technologies and industries for years to come.
Just recently, the Federal Government has looked to follow states like Kansas lead, as Sen. Ted Cruz introduced the SANDBOX Act, which would create a federal regulatory sandbox program.
Outside of the ALEC policy solutions that I have shared, there is another policy idea moving in the states that the Committee should be aware of. One idea introduced in several states enabled state investments into cryptocurrency through cryptocurrency reserves. New Hampshire, for example, passed a first in the nation bill that enables the Treasurer to invest up to 5% of the state’s total funds into cryptocurrencies with a market cap exceeding $500 million. Currently, only Bitcoin meets this threshold, but it opens the door to other cryptocurrencies, like Ethereum, which is not far behind.
New industries and opportunities have placed Kansas in a unique position to continue to lead on innovation. With strong reforms already in place, the state is well positioned to continue to attract businesses and protect consumers as technology and products continue to develop. By prioritizing consumer protection and a light-touch regulatory approach, as well as following the Jeffersonian principles of limited government, free markets, and federalism, Kansas can serve as a nationwide example of sound, cryptocurrency reforms. Thank you for the opportunity to speak in front of the Committee this morning, and I look forward to answering your questions.
Respectfully submitted,
Alan Jernigan
Director, Commerce, Insurance and Economic Development Task Force
American Legislative Exchange Council (ALEC)
Chairman Tarwater, Vice Chair Alley, and Members of the Special Committee:
My name is Jake Morabito, and I serve as Senior Director of the Communications and Technology Task Force—as well as the Energy, Environment, and Agriculture Task Force—at the American Legislative Exchange Council. Thank you for the opportunity to speak before your committee today to share more about ALEC’s nonpartisan research and analysis, as well as the efforts of our members across all 50 states on digital assets, blockchain, and cryptocurrency policy. I hope you find this testimony valuable as Kansas considers its own approach in this area.
Members of ALEC’s Communications and Technology Task Force include legislative leaders and policy experts who believe in the proven light-touch regulatory approach that solidified the United States as the clear global leader in emerging technology. ALEC legislators lead the charge with pragmatic policies that grow the digital economy, increase economic opportunity for all, and ensure the next wave of tech innovation happens here on American shores—not overseas in Europe, Asia, or elsewhere.
ALEC members have played a critical role in shaping the governance of emerging technology and telecommunications policy, and the same has held true for digital assets, as states increasingly consider how to separate signal from the noise in the cryptocurrency community. In recent years, inaction at the federal level in Congress, combined with a ping-pong of federal rulemaking depending on the Administration, has made it difficult for innovators and businesses to confidently adopt these tools. While President Trump and the current leadership at agencies such as the Securities and Exchange Commission may have a more optimistic stance about the role of Bitcoin and digital assets in our nation’s financial ecosystem, there is no guarantee that a subsequent Administration will not upend the table once again and enact a regime of burdensome regulation.
Therefore, states like Kansas are in a unique position to provide that regulatory clarity within your jurisdiction on the pressing tech policy and regulatory questions of our time, whether it’s navigating policy questions surrounding artificial intelligence and its use across the economy and government, to digital assets and whether they should be used in state investment funds or for everyday consumer transactions.
My colleague mentioned several examples of market-oriented, light-touch policy solutions to make Kansas a leader in the burgeoning digital assets ecosystem. Perhaps equally as important is what not to do. Some states like New York are pursuing a different path by heavily regulating the technology, proposing new and discriminatory taxes, or even banning crypto mining operations in certain situations.
As the digital landscape evolves and the barrier to entry for digital assets and cryptocurrency continues to fall, states should balance the need to protect consumers from emerging threats, primarily by modernizing and updating existing laws, not creating more regulatory burdens. Instead of jumping the gun with punitive regulations like New York has done, a better approach is to provide some measure of certainty to the digital asset industry and promote responsible adoption.
And that can be accomplished with ALEC’s model Smart Cryptocurrency Rules Act, which lays the groundwork to foster digital asset innovation at the state level. ALEC’s Smart Cryptocurrency Rules Act has five main components.
First, our model policy establishes key definitions in state code for terms such as “digital assets,” “cryptocurrency,” “virtual currency,” and “mining.” Harmonizing these definitions across state law early will provide much-needed regulatory clarity for individuals and businesses, while some of these questions remain unresolved at the federal level. The model policy makes clear that for the purposes of state law and regulation, virtual currencies and digital assets are considered to be personal digital property and should therefore follow the rules established by your state’s Property Code.
Next, to streamline the regulatory process and ease the burden on innovators in the digital assets space, our model policy provides for mutual recognition of money transmitter licenses across states for virtual currency exchanges, brokers, and other digital asset-related companies. These firms are typically required to apply for money transmitter licenses across the 50 states to offer their services. Instead of mandating that emerging crypto and digital asset businesses submit to a duplicative licensure regime before they can even open their doors, our model offers a more permissive approach that allows businesses who already have an active money transmitter license from any state to begin services in this state, provided that sufficient proof is provided and accepted as a reciprocal license within 30 days.
Finally, the ALEC model expressly preempts all municipal or county-level regulations and restrictions relating to digital assets, and declares that public utilities should not penalize, discriminate, or differentiate between crypto mining and other commercial or industrial zoned uses of electricity.
Turning to another example of how states can encourage innovation in emerging technology, states are increasingly considering legislation that recognizes an inherent “Right to Compute” either in statute or by constitutional amendment. First signed into law in Montana earlier this year, and as the subject of ongoing debate in New Hampshire, ALEC’s model Right to Compute recognizes the fundamental right of your state’s citizens to privately own or make use of computational resources for lawful purposes. Any government restriction on the lawful use of technology must be narrowly tailored and fulfill a compelling government interest. Whether it is novel artificial intelligence tools, digital assets, or a future technological innovation we haven’t even dreamed of yet, the Right to Compute puts the onus on government to prove why new regulations limiting otherwise lawful use of technology are necessary.
However, I encourage you not to misinterpret the Right to Compute as a blank check for technology companies or bad actors to get away with harmful or illegal conduct. ALEC’s model Right to Compute clarifies that a compelling government interest includes legislative and regulatory efforts to combat scams and fraud; protecting adults and minors from harm caused by deceptive deepfakes and other synthetic content; monitoring the risk management practices in place at your state’s critical infrastructure facilities; and addressing common law nuisances created by physical data center infrastructure.
Some states, like Arkansas, Montana, and Oklahoma, have taken this concept a step further by also considering distinct “Right to Mine” legislation, which would establish key protections in state law for Bitcoin and digital asset holders. Examples of the protections provided in such laws are a guarantee of the right to self-custody, preventing discriminatory taxes on the use of Bitcoin and other virtual currencies for transactions, and creating a regulatory environment that would streamline adoption for more mainstream uses of cryptocurrency in everyday transactions. ALEC does not yet have model legislation on Right to Mine, but many liberty-minded policymakers and stakeholders are recognizing the need to restrain government overreach at home as nations like China pioneer the use central bank digital currencies for invasive citizen surveillance and as a tool to tightly control access to the financial system.
Consumer protection is another critical element of this conversation. I, too, am concerned at the prospect of bad actors leveraging cryptocurrency to scam Americans, perpetuate fraud, commit financial crimes, or otherwise engage in illegal conduct. Especially in the context of artificial intelligence legislation, I have observed that many states are pursuing new regulations on technology with the goal of preventing bias and discrimination in outcomes. State lawmakers may be operating in good faith when proposing such legislation, but these frameworks would often create an immense regulatory burden for your state’s businesses, schools, hospitals, and more by increasing compliance costs and requiring frequent “risk assessments” to prove technology is not being used to discriminate.
In many cases, the robust body of federal and state consumer protection, anti-discrimination, and civil rights laws already have the enforcement mechanisms and regulatory framework to deal with emerging challenges—it is simply a matter of adapting the existing framework.
If there are any genuine gaps or loopholes in the law that could be exploited, it could be appropriate to pursue targeted legislation to address those concerns, similar to how nearly three-quarters of the states at this point have adopted legislation to crack down on the risk of AI CSAM and the distribution of non-consensual intimate images. Law enforcement will also need to get up to speed on the ins and outs of this industry to help distinguish the legitimate actors and use cases from the fraudulent ones.
With this in mind, ALEC recently approved new model legislation that could help Kansas and other states tackle consumer protection and anti-discrimination concerns head-on without limiting innovation or ballooning the role of government. This model legislation, which we call the Technology-Neutral Anti-Discrimination Clarification Act, would make a surgical edit clarifying in your state’s existing civil rights statutes that illegal conduct is still illegal, no matter which technology is used—including digital assets and cryptocurrency. ALEC’s model policy has gained traction in Colorado, where it is being considered by the State Senate and the Governor as a solution to fix its problematic AI law before it is scheduled to take effect in 2026.
In closing, Kansas has already done phenomenal work promoting responsible entrepreneurship and innovation in your state. This committee has the opportunity to build on that momentum by becoming a leader in the burgeoning digital assets and AI marketplace. Following the proven, light-touch, harms-based approach to regulation is the key to securing another century of American economic might. Thank you again for the opportunity to speak this morning, and I welcome any questions.
Respectfully submitted,
Jake Morabito
Senior Director, Communications and Technology Task Force
American Legislative Exchange Council (ALEC)