Texas Establishes Strategic Bitcoin Reserve: Allocates $10 Million, First Implementation

Texas recently passed the SB 21 bill, becoming the third state in the United States to enact legislation establishing a state-level strategic Bitcoin reserve. Although Arizona and New Hampshire were ahead in passing similar bills, Texas is the first state to set up an independent Bitcoin reserve fund supported by public funds.

The state government has allocated $10 million to purchase Bitcoin within this fiscal biennium. This fund will be managed by the state treasurer and established outside the state financial system. At the same time, the governor has signed the HB 4488 bill, ensuring that this Bitcoin reserve fund is not affected by the state's periodic "fund sweeps" mechanism, meaning it will not be diverted for general fiscal purposes.

Detailed Explanation of SB21: Implementation Rules for Bitcoin Reserves

The SB21 bill considers that Bitcoin and other cryptocurrencies have strategic potential to enhance the financial resilience of the state and can serve as tools to combat inflation and economic fluctuations. The bill stipulates the establishment of a Texas Strategic Bitcoin Reserve as a dedicated fund outside the state treasury, managed and operated by the Comptroller.

The main regulations include:

1. Flexible asset management: The chief accountant can invest, exchange, sell, manage, or hold based on prudent investment standards.
2. Reserve funds can be jointly invested with the state treasury fund pool.
3. The comptroller may not arbitrarily transfer reserve funds to the state treasury.
4. Investment asset scope: The average market value of the purchased cryptocurrency in the past 24 months must not be less than $500 billion.

At the execution level, the Comptroller may enter into contracts with third-party entities, including qualified custodians with cold wallet security custody technology and qualified liquidity providers assisting in asset purchase management. The bill also allows the Comptroller to use derivatives in cases that benefit the reserves.

From Precious Metals to Bitcoin: The Continuation of Financial Sovereignty Exploration

The congressman involved in the drafting of the bill stated that this bill is a continuation and expansion of existing policies. He believes that the right of the public to own, hold, and use any medium of exchange recognized by each other is beyond doubt, whether it is cash, coins, or precious metals.

He emphasized that the strategic Bitcoin reserves are not intended to compete with existing precious metal custodians, but rather to be functionally complementary. They both provide scarce, valuable resources that can be transferred between individuals and are effective means of combating inflation.

Bitcoin Strategic Reserves: Local Government Policy Experiments

Various state-level Bitcoin reserve bills in the United States are advancing rapidly. On June 25, Arizona passed the "Bitcoin Reserve" bill HB2324, establishing a reserve fund for assets obtained through criminal asset forfeiture.

State governments seem to be ahead of the federal government in this area. The federal system in the United States allows states to serve as "policy laboratories," enabling them to test new policies more quickly and in closer alignment with public opinion. Compared to the federal government, states face more constraints in terms of finances; thus, the core significance of strategic Bitcoin reserves lies in preserving public funds, combating inflation, and ensuring that state governments can fulfill their obligations in the future.

The custodian will be publicly tendered

Currently, Texas is holding meetings with companies interested in responding to the Request for Proposal for services from the State Treasury Trust Agency. A public and transparent bidding process will follow. The bill authorizes the Comptroller to use derivatives to gain exposure to Bitcoin, but relevant parties hope to directly custody physical Bitcoin and manage the private keys, rather than simply purchasing an ETF.

The SB21 Act sets detailed conditions for "liquidity providers," but the definition of "qualified custodians" is more flexible, possibly to broaden the scope of competition. Several well-known institutions offer different custody solutions, and the Office of the Comptroller and state treasury trust management agencies will need a certain learning process to evaluate various proposals.