Texas Enacts Law Allowing State to Hold Bitcoin as Reserve

Texas has taken a significant step in integrating Bitcoin into its state financial policy with the enactment of Senate Bill 21 (SB 21) by Governor Greg Abbott on June 21, 2025. This legislation establishes a legal framework for the state to hold Bitcoin as part of its financial reserves, marking a notable development in state-level digital asset policy. The new law empowers the Texas Comptroller of Public Accounts to manage a dedicated Bitcoin reserve fund, which will be maintained outside the state treasury. The fund will be supported by legislative appropriations, dedicated fees, investment income, and voluntary donations of cryptocurrency.

SB 21 introduces formal guidelines for the acquisition, custody, and liquidation of digital assets under state supervision. A key provision in the bill limits investments to digital assets with a minimum average market capitalization of $500 billion over the preceding 12 months, a criterion currently met only by Bitcoin. This restriction is designed to mitigate exposure to volatile or thinly traded tokens, effectively making Bitcoin the sole eligible asset for the reserve.

The enactment of SB 21 follows the earlier passage of House Bill 4488, a complementary measure designed to protect the state's Bitcoin and other cryptocurrency reserves from being absorbed into Texas’s general revenue fund. Without this legal safeguard, funds allocated for digital asset holdings faced the risk of being liquidated in 2025 to cover budgetary shortfalls. Together, the two pieces of legislation form a comprehensive framework: HB 4488 secures the legal status of Bitcoin reserves under state law, while SB 21 provides the operational authority to purchase and manage those assets.

During its progression through the legislature, SB 21 underwent several revisions. Notably, the House Committee on Delivery of Government Efficiency introduced clearer operational protocols, risk management guidelines, and limits on speculative investments using public funds. These amendments were aimed at addressing concerns over Bitcoin’s inherent price volatility and the fiscal prudence of allocating government resources to such assets.

Supporters of the move argue that formalizing Bitcoin as a strategic reserve asset could enhance Texas’s financial resilience, act as a hedge against inflation, and position the state as a leader in digital asset integration within public finance. However, critics have raised concerns about the initiative’s exposure to risks, including market volatility, regulatory shifts, and cybersecurity threats. Questions remain about whether allocating taxpayer resources to inherently speculative assets aligns with sound fiscal governance.

The decision to integrate Bitcoin into state financial policy is part of a broader strategy by Texas to position itself as a leader in the digital asset space, attracting miners, blockchain companies, and innovators to the state. This move could pave the way for Texas to become a direct holder of Bitcoin, potentially adding it to state investment portfolios or reserves. This would be a landmark move, positioning Texas at the forefront of state-level digital asset adoption.

The enactment of HB 4488 and SB 21 carries significant implications. Benefits include increased legitimacy for Bitcoin and other digital assets, attracting more crypto businesses and investors to Texas, potential state asset diversification with an uncorrelated asset like Bitcoin, and setting a precedent for other states to explore similar legislation. However, there are also potential challenges and considerations, such as regulatory uncertainty, market volatility, and the need for robust security and custody solutions for managing state-held digital assets.

Governor Greg Abbott’s signing of HB 4488 is a concrete step by Texas to provide a protective legal foundation for digital assets, including potential Bitcoin reserves held outside the traditional treasury. While the decision on SB 21, which could enable direct state investment in Bitcoin, is still pending, the direction is clear: Texas aims to be a leader in the digital asset space. This activity not only supports the state’s growing crypto industry but also signals to the broader market that digital assets are increasingly being considered within established financial and governmental frameworks.