Texas Allows Unlimited Bitcoin Investment in State Fund

Texas Governor Greg Abbott signed the “Bitcoin Reserve Bill” SB 21 into law on June 21, allowing the state to invest an unlimited amount of money from the state’s fund into Bitcoin (BTC). This legislation creates the Texas Strategic Bitcoin Reserve, enabling the Comptroller to purchase BTC as long as the asset’s market cap exceeds $500 billion, a threshold that only Bitcoin currently meets.

With the proposal signed into law, Texas became the third state in the US with an official Bitcoin reserve, joining New Hampshire and Arizona. The statute does not cap allocations, meaning lawmakers could appropriate the full balance of the Economic Stabilization Fund. The ESF closed fiscal 2024 with $21 billion in cash and investments, according to the Comptroller’s annual cash report and supplemental ESF fact sheet.

If legislators route the maximum, Texas alone could become the largest public-sector Bitcoin holder in the US. The state could funnel up to $2.1 billion in Bitcoin if it decides to allocate up to 10% of its budget in BTC, as Arizona had intended to with its failed bill. Together with New Hampshire, the total state allocations could reach nearly $2.2 billion.

Governor Kelly Ayotte signed House Bill 302 on May 6, authorizing the treasurer to place any digital asset that has a market capitalization above $500 billion into a strategic reserve. The statute caps holdings at 5% of the state’s Revenue Stabilization Reserve Account. New Hampshire’s latest bond-offering documents list an account of $292.5 million for fiscal 2023, with the BTC investment ceiling representing about $14.6 million.

Arizona’s Bitcoin and Digital Asset Reserve Fund became law on May 7 via House Bill 2749. The measure directs unclaimed or seized digital assets to a state-run wallet, which can be staked or utilized in airdrops, with the proceeds returning to the fund. However, there is no report to date on the amount of crypto seized by Arizona. The SB 1373 failed on May 12 after Hobbs’ veto. The proposal would permit the treasurer to deploy up to 10% of the Budget Stabilization Fund (BSF) into BTC once enacted. Legislative budget writers project the BSF at roughly $1.5 billion for fiscal 2025, implying a prospective Bitcoin allocation near $150 million. As a result, if a similar bill is approved in Arizona, the investment amount in Bitcoin would be boosted to over $2.3 billion.

This move by Texas to potentially invest up to $2.1 billion in Bitcoin represents a significant shift in the state's financial strategy. By allocating up to 10% of its treasury fund into Bitcoin, Texas is positioning itself as a leader in the adoption of digital assets within the public sector. This decision could have far-reaching implications for the state's financial stability and its role in the broader cryptocurrency landscape. The lack of a cap on allocations means that Texas has the flexibility to adjust its investments based on market conditions and the state's financial needs. This strategic move could potentially enhance the state's financial resilience and provide a hedge against inflation, given Bitcoin's historical performance as a store of value.

The passage of SB 21 in Texas follows similar legislation in New Hampshire and Arizona, indicating a growing trend among US states to incorporate Bitcoin into their financial reserves. New Hampshire's House Bill 302 authorizes the treasurer to place digital assets with a market capitalization above $500 billion into a strategic reserve, capping holdings at 5% of the state’s Revenue Stabilization Reserve Account. This move by New Hampshire, along with Texas's potential investment, highlights the increasing acceptance of Bitcoin as a viable asset for public-sector reserves. The combined allocations from Texas and New Hampshire could reach nearly $2.2 billion, underscoring the significant role that Bitcoin is playing in state financial strategies.

In contrast, Arizona's Bitcoin and Digital Asset Reserve Fund, established via House Bill 2749, directs unclaimed or seized digital assets to a state-run wallet. However, the lack of reported crypto seizures in Arizona suggests that the fund's potential impact may be limited. The failure of SB 1373, which would have allowed the treasurer to deploy up to 10% of the Budget Stabilization Fund into BTC, further complicates Arizona's role in the state-level adoption of Bitcoin. Despite these setbacks, the potential for a similar bill to be approved in the future could boost Arizona's Bitcoin investment to over $2.3 billion, aligning it more closely with the strategies of Texas and New Hampshire.