In a move that has sparked backlash across the crypto community, Arizona Governor Katie Hobbs has vetoed two key pro-crypto bills and simultaneously signed into law a controversial bill tightening regulations on Bitcoin ATMs. The decision, delivered via an official veto letter on May 13, 2025, is being viewed as a strong message of caution toward the rapidly evolving digital asset industry.
While other U.S. states have moved toward crypto-friendly frameworks, Arizona’s action signals a sharp turn — one that could have ripple effects nationwide.
What the Vetoed Bills Would Have Changed
The two bills vetoed by Governor Hobbs were:
- SB 1236 – A proposal to exempt certain crypto transactions from state-level capital gains taxes.
- SB 1373 – A bill designed to offer legal clarity on decentralized identity systems and blockchain-based record-keeping.
According to Hobbs, both proposals lacked the necessary safeguards to protect consumers. In her veto letter, she stated:
“The crypto industry remains volatile, risky, and largely unregulated… Arizona must approach this space with prudence.”
The official veto document can be viewed here (PDF).
Crypto advocates argue that these bills would have brought regulatory clarity and encouraged responsible innovation. Instead, Arizona has taken a more aggressive stance — surprising many in a state that had once explored using Bitcoin for tax payments.
The New Bitcoin ATM Law: Stricter Than Expected
While vetoing pro-crypto legislation, Governor Hobbs approved HB 2204, a bill that imposes tight limits on Bitcoin ATM operations across Arizona.
Key elements of the new law include:
- A $1,000 cap per user per day on crypto ATM transactions.
- Mandatory disclosures for users about exchange rates and transaction fees.
- Stricter identity verification requirements to reduce fraud and money laundering.
Lawmakers who supported the bill cited rising concerns about unlicensed crypto ATMs being used for scams, especially among older residents. Critics argue that while consumer protection is important, the measure may unintentionally hinder financial inclusion and slow adoption of legitimate crypto services.
Industry Reaction: Concern, Confusion, and Criticism
The crypto community was swift to react on X, calling the move “regressive” and “out of touch” with the broader fintech trend. Some expressed frustration that the state is blocking innovation while enabling overregulation.
Several Arizona-based blockchain startups now face uncertainty around compliance and may reconsider expansion plans or even relocation to more crypto-friendly jurisdictions like Texas or Florida.
Final Thoughts: A Turning Point for U.S. State-Level Crypto Policy?
Arizona’s recent crypto crackdown is a stark reminder of the fragmented approach to regulation in the United States. While federal frameworks remain in flux, state-level decisions like this one will continue to shape the Web3 landscape — sometimes in unexpected ways.
For Arizona, this marks a clear shift away from innovation-first policy toward risk-averse regulation. Whether other states follow suit or push back with more progressive crypto legislation remains to be seen.
