Kentucky Eases Crypto Rules by Removing Self-Custody Restrictions

Kentucky has moved to ease crypto rules after lawmakers removed a clause that lawmakers said could limit self-custody of digital assets. The new law assures that individuals can continue to hold and control their own Bitcoin without requiring the custody of a governing body.

Kentucky Crypto Regulation Shift Follows Legislative Debate

The legislative process, according to an X post, started with a draft bill, which contained ambiguity on matters pertaining to custody of digital assets. The initial provisions that lawmakers took into consideration were those that could require certain custodial systems to hold cryptocurrencies such as Bitcoin.

Nevertheless, law professionals and blockchain enthusiasts sounded alarms at the beginning. They claimed that the wording provided a regulatory grey zone that would indirectly restrict non-custodial wallets. Consequently, the proposal sparked controversy over whether it was inconsistent with the concept of individual control over personal keys.

The matter was part of a wider regulatory debate in the United States as well. This comes in addition to the move where a CLARITY Act deal on stablecoin rewards is expected this week, as Coinbase CLO Paul Grewal indicated progress toward resolving the ongoing yield debate.

The SEC has historically reaffirmed custody requirements in certain cases. Meanwhile, the application of a similar logic to self-custodied Bitcoin brought about a new layer of state-level.

Additionally, lawmakers in Kentucky looked at the evidence presented by the legal community, digital rights groups, and local industry 

Amendment Clarifies Scope of Crypto Regulation

The new bill covers the regulation of licensed digital currency businesses and not individuals. Legislators imposed regulations that were associated with anti-fraud and anti-money laundering provisions.

This difference was the focus of Kentucky’s final crypto regulation. Lawmakers wanted to give clarity without limiting self-custody. As a result, the bill now breaks down commercial custodial services from individual ownership. In addition, the change process highlighted the role of stakeholder engagement.

Global and Federal Developments Add Context

Kentucky’s update comes as other countries continue to build crypto regulation frameworks. On April 1, legislators in Australia enacted the Corporations Amendment (Digital Assets Framework) Bill 2025.

The law requires crypto exchanges and tokenized custody providers to obtain financial services licenses. It also outlines digital tokens, digital asset platforms, and custody structures within prevailing regulatory frameworks. The control will be in the hands of the Australian Securities and Investments Commission who will be supervising compliance within six months.

At the same time, U.S. federal discussions continue around market structure legislation. Coinbase Chief Legal Officer Paul Grewal said a deal on stablecoin yield provisions in the CLARITY Act could be reached within days.

He noted that the legislation would define regulatory roles between the Securities and Exchange Commission and the Commodity Futures Trading Commission. The bill could also be referred to the Senate Banking Committee for a markup later this month.

The amended Kentucky bill now awaits final approval from Governor Andy Beshear. If signed into law, it will confirm the state’s approach to balancing oversight with individual asset control.