Texas Establishes Bitcoin Reserve to Hedge Against Inflation

Texas has taken a significant step in its financial strategy by establishing a Bitcoin reserve. Governor Greg Abbott signed Senate Bill 21, also known as “The Texas Strategic Bitcoin Reserve Act,” which authorizes the state to purchase and hold Bitcoin as part of its financial assets. This move makes Texas the third state in the U.S. to create such a reserve, following Arizona and New Hampshire. The reserve is intended to hedge against inflation and boost the state's financial resilience by treating Bitcoin as a long-term strategic asset.

The legislation, written by Senator Charles Schwertner, allows the state comptroller to set up a Bitcoin reserve to invest in Bitcoin and other approved cryptocurrencies. This plan is designed to protect against inflation and economic problems while strengthening the state’s finances. To qualify for the reserve, assets need to have an average market cap of at least $500 billion over the last 24 months. Currently, only Bitcoin meets this requirement, with a market value of over $2 trillion. Ethereum, the second-largest cryptocurrency, has a market cap of about $277 billion and does not currently meet the criteria, but it could qualify if its market cap increases.

The law creates a five-member advisory committee to manage the reserve. This committee will include the comptroller and three experts in cryptocurrency investment. The comptroller can also hire qualified custodians for safe storage and liquidity providers who have at least five years of experience in digital asset trading. Before it became law, SB 21 had strong backing in the Texas Senate, where it passed with 25 votes for and 5 against, and in the House with 9 votes for and 4 opposed. The law will start on September 1, 2025.

Governor Abbott also signed House Bill 4488, which protects the Bitcoin reserve from being automatically abolished and keeps its legal status, even if no Bitcoin is bought by the summer of 2025. Abbott had earlier shown his support for the bill, emphasizing Texas’s dedication to adopting cryptocurrency. This strategic decision positions Texas as a leader in integrating cryptocurrency into state financial reserves, potentially setting a precedent for other states to follow. The move underscores the growing acceptance of Bitcoin as a viable asset class and its potential role in mitigating economic risks.