Kentucky (KY): Bitcoin and virtual-currency law

Summary

Kentucky has paired a "Blockchain Basics"-style pro-bitcoin law with a strict kiosk licensing law:

• HB 701 (2025):
• Protects the right to accept digital assets as payment and to self-custody them, and allows node operation and staking.
• Says staking-as-a-service is not a securities offering.
• Shields validators from liability for transactions they only validate.
• Exempts software developers, crypto-to-crypto exchanges and node operators from money-transmitter licensing.
• SB 189 (2026): builds a separate licensing regime for kiosk operators with tight limits, an 18% charge cap and a 72-hour cooling-off option.

Kentucky has also offered crypto-mining tax incentives since 2021 (from memory; see section 4).

1. Money-transmitter licensing and virtual currency

• KRS 286.11. We did not retrieve the DFI's general position on whether fiat-to-crypto exchange is licensable money transmission (gap).
• HB 701 (2025), Acts Ch. 50, § 4, amending KRS 286.11-007. The subtitle "does not apply to ... (8)(a) Any individual or business that: 1. Develops or deploys software on a blockchain protocol, even if the software effectuates the exchange of one digital asset for another digital asset; 2. Exchanges digital assets for other digital assets; or 3. Operates a node or series of nodes on a blockchain protocol" (Acts Ch. 50, saved).

2. Virtual-currency-specific statutes and guidance

HB 701 (2025), "AN ACT relating to blockchain digital assets", Acts Ch. 50. Signed by Governor (Beshear) 2025-03-24 (bill record):

• New KRS 369 sections define digital asset, hardware wallet, self-hosted wallet, node, staking, staking-as-a-service and stablecoin.
• "An individual shall not be prohibited from: (a) Accepting digital assets for payment for legal goods or services; or (b) The use of" a self-hosted or hardware wallet. No one may be required to accept digital assets.
• "The operation of a node shall be allowed to: (a) Connect to a blockchain protocol ...; (b) Transfer digital assets ...; or (c) Participate in staking". The Attorney General may act against violations.
• People who operate nodes or provide staking-as-a-service "shall have no liability for a specific transaction if the person only validates the transaction."
• KRS 292.340 amended: "A business that offers to provide staking as a service to any person shall not be deemed to be offering or selling a security under this chapter."
• The KRS 286.11 exemptions described in section 1.

3. Crypto ATM / kiosk law

SB 189 (2026), "AN ACT relating to the regulation of digital asset business", Acts Ch. 126. Signed by Governor 2026-04-13 (bill record; Acts Ch. 126, saved). It creates KRS Chapter 286, Subtitle 13:

• Licence: a separate virtual-currency-kiosk licence from the DFI. Bond of at least $500,000 (the Commissioner may require up to $5M). Net worth of at least $500,000. Change-of-control approvals and annual renewal reports.
• Limits (§ 26(2)(a), as numbered in our reading): no more than $2,000 per day for all of a user's kiosk transactions, and $10,500 for all transactions with a new user.
• New-user protection: the operator must either "Wait seventy-two (72) hours before processing a virtual currency kiosk transaction for a new virtual currency kiosk user", or, at its own cost, let a new user cancel and receive a full refund within 72 hours.
• Charges cap: "the greater of: 1. Five dollars ($5); or 2. Eighteen percent (18%)".
• Live toll-free customer service during operating hours, and prescribed on-kiosk warnings ("WARNING: This technology can be used to defraud you ...").
• Enforcement: civil penalties of $1,000 to $5,000 per violation, which may accrue daily. The DFI may order seizure of kiosk contents or have the kiosk rendered inoperable.
• Rulemaking: "On or before January 1, 2027, the commissioner ... shall promulgate any emergency and ordinary administrative regulations required under Sections 1 to 30 of this Act" (§ 35).
• The act also defines "legal tender" with reference to "Article 1, Section 10, of the Constitution of the United States". It excludes foreign-government money that "was a virtual currency before the government authorized" it. This appears aimed at El Salvador-style bitcoin legal tender (our reading).

4. Tax treatment

• Crypto-mining incentives:
• Kentucky enacted a sales-and-use-tax exemption for electricity used in commercial cryptocurrency mining (2021, HB 230) and related incentives (2022).
• These are from memory and were not retrieved or verified in this pass.
• Kentucky income tax starts from federal AGI (DOR guidance not retrieved).

5. Notable enforcement

• None retrieved for Kentucky (gap). A KPD reference appears in a Tennessee story headline.
• Kentucky is a participating state (Appendix A); its share of the $2.2M administrative penalty is $62,853.57 (Appendix B) Coinme consent order, App. A–B (completeness check, 2026-10-09).

6. Bills, 2025 and 2026 regular sessions

Statuses come from apps.legislature.ky.gov bill records, checked 2026-10-09.

Pending: none. The 2026 regular session ended in April and the 2027 session begins in January 2027.

7. Contested and fringe claims

• "Blockchain Basics" model laws. HB 701 resembles model bills promoted by bitcoin-advocacy groups such as the Satoshi Action Fund. Supporters call it protection of "freedom to transact" and self-custody. Critics see preemption of local and state regulators and a carve-out for staking from securities law. Which model HB 701 tracks is our comparison and unverified.
• Legal-tender definition. SB 189's definition invokes the US Constitution's gold-and-silver clause ("as permitted under Article 1, Section 10"). Sound-money advocates read that clause as allowing states to recognize gold and silver as tender. The definition's practical effect on bitcoin appears to be nil (our reading).

Saved sources (sources/states/ky/)

See sources/states/ky/INDEX.md.

Gaps

• The DFI's general virtual-currency licensing position under KRS 286.11.
• Verification of the crypto-mining tax incentives (2021–2022).
• Kentucky enforcement actions.