MEASURE WOULD CREATE STATE CRYPTOCURRENCY RESERVE
(AUSTIN) — The state of Texas could begin investing in cryptocurrencies, namely bitcoin, under a bill considered by the Senate Business and Commerce Committee on Tuesday. SB 21, by committee chair and Georgetown Senator Charles Schwertner, would create a new reserve fund that could contain crypto currencies with a market capitalization value exceeding $500 billion. Today, only Bitcoin reaches that threshold. Schwertner said it behooves the state to consider adding a proven, lucrative option to the state investment portfolio. “We can buy land, we can buy gold; I think the state of Texas should have the option of evaluating the best performing asset over the last 10 years,” he said.
Georgetown Senator Charles Schwertner wants to expand the state’s investment portfolio to include Bitcoin.
Cryptocurrencies are a relatively new type of security, usually created by computers solving increasingly difficult algorithms. This work creates scarcity, scarcity — and investor buy-in — creates value, and all transactions are monitored and confirmed via a public ledger known as a blockchain. Over the last ten years, the value of bitcoin — by far the largest and most valuable cryptocurrency, boasting a market cap of $1.8 trillion — has risen from $500 per coin in 2016 to more than $100,000 in recent weeks. In early 2024, the Securities Exchange Commission permitted the creation of a new regulated instrument, called an exchange traded fund. These funds work similarly to a mutual or index fund, though invested in various crypto currencies rather than stocks or bonds.
The crypto reserve envisioned in SB 21 would be funded by legislative appropriations and donations from private citizens and interests. Though there is no money in the current Senate version of the state budget, Schwertner said he would push for the inclusion of a $21 million appropriation to seed the fund. The fund would be administered by the Office of the Comptroller and they would be required to publish a public report on the fund’s performance every biennium. Disbursements from the fund could only be authorized by the legislature.
Comptroller Glenn Hegar, as the potential manager of the proposed fund, was on hand to offer testimony and answer questions related to the state’s investment position and how a crypto reserve might figure in. Though current law allows the comptroller, as well as other state funds like the teachers’ and employees’ retirement funds, to invest in SEC regulated ETFs, no state fund has. The office of the comptroller already manages more than $100 billion in state investments, Hegar told members, and he is always looking for new ways to maximize and protect state assets, even those outside of traditional financing methods. Hegar said that his office is already considering moving towards crypto investment and exploring the ways that crypto trading can fit into his office’s financial management practices. Should the legislature choose to authorize this kind of trading on behalf of the state, they should do so carefully, he said. “Pioneering a strategic bitcoin reserve is a natural step for Texas, where innovation and ideas are nurtured and pursued, “ said Hegar. “We believe this bill takes a measured approach to managing a potentially volatile asset, a critical requirement when investing taxpayer dollars.” Like all assets managed by his office, Hegar said that they would follow the same prudent investor policy when investing potential state crypto assets.
Beyond its financial purpose, Schwertner said that this bill will send a message to Washington, DC that their current profligate spending policies are generating unease at the state level, and that governments are looking for ways to hedge against future uncertainty brought about by increasing inflation and interest rates. “It is a specific signal to our federal government that is being echoed by many other states,” he said. “The federal government can’t continue to spend like this and expect our country to continue to be as prosperous as it was in the past.” Schwertner said that 32 other states are considering similar legislation.
The bill remains pending before the committee.
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