DALLAS, Texas – On Thursday, Texas representative Giovanni Capriglione unveiled a new bill to create a strategic bitcoin reserve in the Lone Star state to fight "inflation and economic volatility." The program will allow Texas to accumulate cryptocurrency in the state treasury by accepting bitcoin-denominated donations, taxes, or fees, which must remain untouched for a minimum of five years before they can be sold or moved.
“No taxpayer funds will be spent on buying bitcoin in order to maximize the chances of the bill passing,” said Lee Bratcher, president of the Texas Blockchain Council. “The bitcoin will come from donations from Texans, U.S. based companies, and other sources of existing state resources.”
“The state’s financial goals are why a bitcoin reserve makes sense in the eighth-largest economy in the world," Kadan Stadelmann, Komodo Platform's Chief Technology Officer, told TheStreet Crypto about the proposal. “Texas is looking to become a global financial powerhouse, and towards this end, it has previously made the decision to launch the Texas Stock Exchange, which opens next year in Dallas."
Among other benefits, Stadelmann emphasized that the reserve would enable Texas — home to over 30 million people — to develop its own bitcoin strategy, similar to those of countries like Bhutan and El Salvador.
“After all is said and done, it won’t be the stock exchange that places Texas at the center of the financial universe," Stadelmann said, "but rather its leadership on the bitcoin reserve and related bitcoin matters.”
The Texas legislature is scheduled to convene in January, but the bitcoin strategic reserve bill must undergo a committee referral, public hearing, debate, and vote before it can be passed by both chambers of the legislature and sent to Governor Greg Abbott for approval. "Texas should want to be early and do it now," Stadelmann said about the timeline. "With a quickening of bitcoin adoption, Texas will be forced to move forward at some point with a bitcoin reserve bill, whether now or in the future, as nation-states and other U.S. states establish their own reserves."
Still, Texas' track record of approving blockchain and bitcoin legislation is largely positive. In recent years, the state approved a bill allowing Texas companies to use blockchain technology, and in 2021, the Lone Star state also greenlit a virtual currency bill establishing the legal status of virtual currencies and granting rights to holders.
"It is likely Texas will pass the bitcoin reserve bill due to Texas’ conservatism, which has proven friendly to bitcoin, and the state’s desire to be a financial center,” Stadelmann told TheStreet Crypto.
However, there are several limitations of the strategic bitcoin reserve. These include the high volatility of bitcoin, which can lead to precipitous market fluctuations that erode the stability and reliability of a reserve designed to combat inflation. Additionally, the limited initial funding of the reserve restricts its ability to scale or shift in response to market troubles. Compounding these financial concerns are the ongoing cybersecurity risks that the crypto sector faces, highlighting the technological complexity of maintaining a reserve, while the absence of direct state investment arouses concerns about the reserve’s long-term sustainability.
Building on these challenges, Texas' initiative may potentially intersect with future federal cryptocurrency regulations. While the incoming Donald Trump administration is likely to favor lax regulations – and Trump is toying with his own plan for a national strategic bitcoin reserve – future political changes and crypto market fluctuations might ultimately lead to stricter oversight, engendering uncertainty for the reserve's long-term viability.
