Texas Establishes Strategic Bitcoin Reserve: The First State-Level Fund to Be Implemented

Texas recently passed SB 21, becoming the first state in the United States to establish an independent Bitcoin reserve fund. The state government has allocated $10 million for the purchase of Bitcoin over the next two years. This fund will be managed by the state comptroller and will be set up outside of the traditional state financial system.

At the same time, the governor also signed the HB 4488 bill, ensuring that the fund is not affected by the state's periodic "fund sweep" mechanism, meaning it will not be diverted for general fiscal purposes. Even if no Bitcoin is purchased before next summer, the legal status of the reserve fund will continue to exist.

The SB21 bill believes that Bitcoin and other cryptocurrencies have the strategic potential to enhance the fiscal resilience of the state and can serve as tools to combat inflation and economic fluctuations. The bill stipulates that reserve funds can flexibly utilize assets and can co-invest with the state treasury fund pool, but they cannot be transferred to the state treasury at will. Currently, only Bitcoin meets the investment criteria.

At the execution level, the chief accountant can enter into contracts with qualified custodians that possess cold wallet security custody technology, as well as qualified liquidity providers that assist in asset purchases and management. Additionally, if beneficial for reserves, the chief accountant may use derivatives. The bill also establishes an advisory committee composed of five members, responsible for asset valuation recommendations and investment policy design, among other tasks.

The congressmen involved in drafting the bill stated that the strategic Bitcoin reserves are functionally complementary to the existing precious metal custody. They both provide a scarce, valuable resource that can be transferred between individuals, and they are both effective means of combating inflation.

Experts in Bitcoin policy research believe that the core significance of strategic Bitcoin reserves lies in preserving the value of public funds, combating inflation, and ensuring that state governments can fulfill their obligations in the future. The fiscal structures of states vary greatly, with some states hoping to integrate Bitcoin into their existing investment portfolios or attempt more cutting-edge financial instruments.

The chairman of the Texas Blockchain Council stated that they are assisting crypto companies in establishing connections with the state treasury trust management agency, and a public and transparent bidding process will be carried out subsequently. They hope to directly custody physical Bitcoin and hold the private keys, rather than simply purchasing ETFs.

This $10 million investment accounts for only 0.00004% of Texas's annual budget and can be seen as a "test the waters" approach. The most important thing right now is to ensure that the relevant departments have sufficient capabilities to collaborate with qualified custodians to ensure the secure custody of reserves, compliance audits, and other processes.