Ethereum News Today: Texas Bets State Funds on Bitcoin Reserve, Balancing Innovation Against Fiscal Risk

Texas Governor Greg Abbott has signed Senate Bill 21 (SB 21) into law, establishing the state's Strategic Bitcoin Reserve as a sovereign-backed initiative to diversify financial assets. The law, authored by Senator Charles Schwertner, permits the Texas Comptroller to invest in cryptocurrencies with a 24-month average market capitalization exceeding $500 billion. While Bitcoin currently meets this threshold with a valuation over $2 trillion, Ethereum (ETH) has only briefly exceeded $500 billion twice in its history-most recently in 2024–2025. A recent market correction reduced ETH's market cap to $494 billion, delaying its potential inclusion in the reserveCharles Schwertner^[1].

Under the law, the reserve operates outside the state treasury and is managed by the Comptroller, who may contract with regulated financial institutions or entities in Texas for custodial servicesTechopedia^[3]. Schwertner emphasized that Ethereum could qualify if it maintains a sustained 24-month market cap above $500 billion, a requirement designed to ensure stability and liquidity for taxpayer-backed assetsCharles Schwertner^[1]. As of August 2025, Ethereum's market cap briefly stabilized above $500 billion, potentially aligning it with the reserve's eligibility criteria.

Texas joins New Hampshire and Arizona as the third U.S. state to adopt a crypto reserve. Arizona's fund, signed in May 2025, avoids taxpayer funds by sourcing unclaimed property, airdrops, and staking rewardsCOINOTAG^[6]. New Hampshire's law allows direct investment in cryptocurrencies meeting the $500 billion threshold. Texas's approach, however, is unique in allocating sovereign funds for a strategic reserve, distinguishing it from states relying on seized assets.

The law mandates biennial reporting on the reserve's holdings and performance, with the Comptroller overseeing an advisory committee of cryptocurrency expertsTechopedia^[3]. Critics argue that Bitcoin's volatility poses risks to public funds, while supporters highlight its potential as a hedge against inflation and a driver of financial innovationBlockBeats^[7]. Texas's initiative also reflects broader national momentum, following President Donald Trump's 2025 executive order proposing a federal Strategic Bitcoin Reserve.

If Ethereum meets the 24-month market cap requirement, the Comptroller will determine custodial arrangements and operational frameworks before any purchases. The process underscores Texas's cautious approach to integrating digital assets into public finance, balancing innovation with fiscal prudence.