Texas Lawmakers Finalize Bitcoin Reserve Bill

Texas lawmakers have finalized Senate Bill 21 (SB 21), a significant piece of legislation that proposes the creation of a Bitcoin reserve fund managed by the state comptroller. The bill, which has undergone several revisions, now focuses solely on spot Bitcoin holdings, removing earlier provisions that included staking other cryptocurrencies. This decision was made to simplify the management and reduce regulatory risks associated with the reserve.

The reserve, named the “Texas Blockchain and Digital Asset Reserve Fund,” will be limited to digital assets with a market capitalization of over $500 billion in the last 24 months, effectively restricting the reserve to Bitcoin. The Texas Comptroller of Public Accounts will oversee the fund, with a five-member advisory committee providing recommendations on investment policy and risk management. The state will be required to publish a financial status report on the fund’s holdings and performance every two years.

This cautious yet optimistic approach by Texas legislators reflects their intent to diversify the state’s financial assets and hedge against inflation and broader economic uncertainties. By integrating Bitcoin into its treasury management strategy, Texas aims to position itself as a leader in crypto innovation and attract crypto-related businesses and investments. This move also aligns with the state’s broader strategy to reduce dependence on inflationary fiat currencies and traditional financial instruments.

The decision to drop staking provisions from the bill was driven by the complexity and regulatory risks associated with participating in crypto staking protocols. By focusing solely on spot Bitcoin holdings, Texas legislators aim to minimize operational risks while still embracing blockchain technology at the treasury level. This approach is seen as a strategic political move, positioning Texas as a counterbalance to federal skepticism about Bitcoin ETFs and crypto banking services.

Governor Greg Abbott, known for his supportive stance on cryptocurrency and blockchain innovation, now has 20 days to either sign the bill into law or veto it. Given Abbott’s track record, supporters of the bill are optimistic that it will be signed without issue. If enacted, the reserve could begin accumulating Bitcoin as early as the end of 2025, making Texas one of the first states globally to officially hold Bitcoin as part of its treasury operations, alongside countries like El Salvador.

The success of this initiative could spur other states to consider similar moves, especially as concerns over inflation and fiscal policy stability continue to loom in the U.S. Texas’ proactive steps in adopting forward-thinking legislation and incorporating Bitcoin into state-level financial strategies are seen as a significant development in the broader trend of U.S. states seeking to reduce dependence on inflationary fiat currencies and traditional financial instruments.