H.F. 246 Section 1. SHORT TITLE. This Act shall be known and may be 1 cited as the “Inflation Protection Act”. 2 Sec. 2. NEW SECTION . 12B.10D Investments —— digital assets 3 and precious metals. 4 1. For purposes of this section: 5 a. “Digital asset” means digital-only assets that confer 6 economic, proprietary, or access rights, including but not 7 limited to virtual currency, cryptocurrency, and natively 8 electronic assets, including stablecoins and nonfungible 9 tokens. 10 b. “Exchange-traded product” means a financial instrument 11 approved by the United States securities and exchange 12 commission, the commodity futures trading commission, or the 13 department of insurance and financial services that is traded 14 on a regulated exchange in the United States and derives its 15 value from an underlying pool of assets, such as stocks, bonds, 16 commodities, or indexes. 17 c. “Precious metal” means gold, silver, or platinum, whether 18 in coin, bullion, or another form. 19 d. “Private key” means a unique element of cryptographic 20 data that is known to the owner of the unique element and is 21 used for signing a transaction on a blockchain. 22 e. “Qualified custodian” means a federal-chartered or 23 state-chartered bank, trust company, or depository institution, 24 or a company regulated by the state which takes custody of 25 digital assets. 26 f. “Secure-custody solution” means a technological product 27 or blended product and service that does all of the following: 28 (1) Ensures that a private key that secures digital assets 29 meets all of the following requirements: 30 (a) Exclusively known to and accessible by the owner of the 31 private key. 32 (b) Exclusively contained within an encrypted environment 33 and accessible only by end-to-end encrypted channels. 34 (c) Not contained, accessible, or controllable by a 35 -1- LSB 1751YH (4) 91 sc/ns 1/ 4

H.F. 246 cellular telephone. 1 (d) Maintained on hardware that is in at least two 2 geographically diverse, secure data centers. 3 (2) Enforces user access controls and a multiparty 4 governance structure for authorizing transactions and logs all 5 user-initiated actions. 6 (3) Has a disaster recovery protocol that ensures customer 7 access to assets in the event the provider becomes unavailable. 8 (4) Undergoes regular code audits and penetration testing 9 from audit firms and promptly remedies any identified 10 vulnerability. 11 g. “Stablecoin” means a digital asset that is issued by a 12 corporation backed by United States currency or high-quality 13 liquid assets and is redeemable on demand by the holder, at par 14 for a fixed monetary value in equivalent United States dollars. 15 2. Notwithstanding section 12B.10, subsection 4, the 16 treasurer of state may invest in precious metals, digital 17 assets with a market capitalization of over seven hundred fifty 18 billion dollars averaged over the previous calendar year, and 19 stablecoins using public moneys from any of the following 20 funds: 21 a. The general fund of the state. 22 b. The cash reserve fund created in section 8.56. 23 c. The Iowa economic emergency fund created in section 8.55. 24 3. The amount of public moneys that the treasurer of state 25 invests from a fund under subsection 2 shall not exceed five 26 percent of the total amount of public moneys in that fund at 27 the time the investment is made. 28 4. A digital asset acquired by a fund listed in subsection 2 29 must be held in one of the following ways: 30 a. By the treasurer of state through the use of a 31 secure-custody solution. 32 b. On behalf of the state by a qualified custodian. 33 c. As an exchange-traded product. 34 5. Precious metals acquired by a fund listed in subsection 2 35 -2- LSB 1751YH (4) 91 sc/ns 2/ 4

H.F. 246 must be held in one of the following ways: 1 a. By the state in physical form or in conjunction with 2 another state according to rules adopted by the treasurer of 3 state. 4 b. On behalf of the state by a qualified custodian. 5 c. As an exchange-traded product. 6 6. The treasurer of state shall only hold stablecoins which 7 have received the appropriate regulatory approvals from a state 8 or the United States. 9 7. If a digital asset can be loaned without increasing 10 the financial risk of the state, the treasurer of state may 11 loan the digital asset to bring further return to the state 12 according to rules adopted by the treasurer of state. 13 8. Any tax or fee that is permitted to be paid to the 14 state in digital assets and is paid with a digital asset with 15 a market capitalization of over seven hundred fifty billion 16 dollars or stablecoin shall be transferred from the fund 17 designated for payment to the general fund of the state, if 18 the fund designated for payment is not the general fund of the 19 state. The treasurer of state shall reimburse the fund to 20 which the qualifying digital asset was designated with United 21 States currency from the general fund of the state. If the 22 digital asset does not have a market capitalization of over 23 seven hundred fifty billion dollars, the digital asset shall be 24 converted to United States currency. 25 9. The treasurer of state may adopt rules pursuant to 26 chapter 17A to implement this section. 27 EXPLANATION 28 The inclusion of this explanation does not constitute agreement with 29 the explanation’s substance by the members of the general assembly. 30 Under current law, the treasurer of state (treasurer) may 31 only make ceratin investments with public moneys. This bill 32 allows the treasurer to invest no more than 5 percent of the 33 moneys from the general fund of the state, cash reserve fund, 34 and Iowa economic emergency fund in precious metals, digital 35 -3- LSB 1751YH (4) 91 sc/ns 3/ 4

H.F. 246 assets with a market capitalization of over $750 billion, and 1 stablecoins. The bill requires that a digital asset be held by 2 the treasurer through the use of a secure-custody solution, by 3 a qualified custodian, or as an exchange-traded product. The 4 bill requires that precious metals be held in physical form by 5 the state or in conjunction with another state, by a qualified 6 custodian, or as an exchange-traded product. The treasurer may 7 only hold stablecoins that have received regulatory approval 8 from a state or the United States. The bill permits the 9 treasurer to loan a digital asset to generate revenue for the 10 state if doing so does not increase the financial risk to the 11 state. 12 The bill provides that if a tax or fee is paid to the state 13 in digital assets with a market capitalization of over $750 14 billion or stablecoin, the asset must be transferred to the 15 general fund and the original fund must be reimbursed with 16 United States currency. If a tax or fee is paid in digital 17 assets with a lesser market capitalization, the asset must be 18 converted into United States currency. 19 -4- LSB 1751YH (4) 91 sc/ns 4/ 4