On March 24, Kentucky enacted HB 701 (the “Act”), which establishes protections and guidelines for blockchain users within Kentucky. The Act introduces new provisions defining terms such as “blockchain,” “blockchain network,” “cryptocurrency,” “digital asset,” and “smart contract.” The Act specifies that individuals are permitted to accept digital assets as payment for goods or services and use digital wallets without facing additional taxes or charges solely based on the use of digital assets. However, it does not mandate the acceptance of digital assets for payment nor exempt them from taxes applicable to similar transactions.

Furthermore, the Act allows the operation of nodes to connect to blockchain protocols, transfer digital assets, and participate in staking activities. It provides legal protections for individuals operating nodes or offering staking services, stating they are not liable for specific transactions if they only validate them. The Act also amends KRS 286.11-007 and KRS 292.340, so certain blockchain and digital asset activities are exempt from some rules, and it makes clear that providing staking services is not the same as selling securities.