Greg Abbott, governor of Texas, has signed Senate Bill 21 (SB 21) into law, which enables the state to create a Crypto Strategic Reserve. Texas now joins the states of New Hampshire and Arizona with having strategic reserves. Abbott received SB 21 on June 1 and had until June 22 to sign it off. SB 21 stipulates that the Comptroller of Public Accounts is responsible for maintaining a crypto fund outside of the state treasury. Pundits speculated that there was a high probability that Texas would approve of the Strategic Reserve. Abbott has made positive comments about Bitcoin in the past and was a likely candidate to approve of the new bill. Texas has become one of the first three US states to accept a Crypto Strategic Reserve. SB 21 outlines procedures for the Comptroller to follow when buying or selling crypto. The reserve treasury will be funded through various means including legislative appropriations and investment returns. Supporters of the bill believe that a Crypto strategy will protect the state from inflation and will encourage businesses to embrace cryptocurrencies.
Texas has enshrined a Crypto Strategic Reserve into law, aiming to protect the state from economic turmoil and to enable financial resilience. SB 21 specifies that cryptocurrencies must hold more than $500 billion market capitalisation over the past 25 months in order to be approved by the Strategic Reserve. However, only Bitcoin at this time has a market cap that surpasses this threshold. Bitcoin has a market cap of $2 trillion. Ethereum has a market cap of $277 billion. Ethereum could be included in the Texas treasury if the token advances above the required threshold.
Public treasuries at the state level have traditionally avoided cryptocurrencies due to a fear of the market’s large swings of volatility and questionable origins. Texas, however, has found a new use for cryptocurrencies like Bitcoin, to be used as a hedge against inflation and economic uncertainty. The new SB 21 legislation is future oriented because it embraces a financial innovation as a treasury asset. Other states may feel emboldened to embrace Bitcoin after seeing Texas successfully adopt a crypto strategy.
Senate Bill 21 (SB 21) establishes a state level Crypto Reserve for the state of Texas, allowing the Public Accounts Comptroller to invest in cryptocurrencies above a certain market cap level. SB 21 actually designates a separate fund outside of the state treasury so that the Comptroller can easily buy and sell crypto. SB 21 further requires the Comptroller to store Bitcoin in cold storage for at least five years before selling. Cold storage allows a trader to store crypto offline so that it has an extra layer of security. A five-person advisory committee will be set up to publish a report on the crypto holdings every 2 years. The Texas Comptroller will also have the option to procure more Bitcoin holdings through voluntary donations. Peter Schiff, economist and Bitcoin critic, said that the new legislation was bad news for Texans but that the good news was that the crypto reserve would be abandoned once Bitcoin dropped below the designated threshold.
New Hampshire, Arizona, and now Texas have signed new crypto laws to allow their states to invest in a Bitcoin Treasury. There has been a slew of other states passing similar bills, but falling short of a final signature. Many public officials feel sceptical about the new innovation and are wary about using public funds, such as those used by public pensions, to invest in what they view as a volatile asset. Arizona, for example, passed Senate Bill 1025 to allow the state to use seized assets to invest in Bitcoin, but was vetoed by Arizona’s governor Katie Hobbs. Arizona has also passed House Bill 2324, which would allow the state to treat abandoned digital assets as unclaimed property. However, there is a high chance that governor Hobbs will veto that bill due to her negative views about cryptocurrencies.
