Texas initiates state-level Bitcoin reserve fund, allocating millions of dollars to promote implementation

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

At the same time, the governor also signed the HB 4488 bill to ensure 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.

Bill Explanation: Specific Execution Plan from Procurement to Custody

The SB21 bill considers that Bitcoin and other cryptocurrencies possess strategic potential to enhance the fiscal resilience of the state and can serve as tools to combat inflation and economic volatility. The bill outlines the following key points:

• Flexible asset management: The Chief Accountant can conduct investment, exchange, sale, management, or holding actions based on the standards of rational and prudent investors.
• Reserve funds can be jointly invested with the state treasury fund pool.
• Investment asset range: The average market value of the purchased cryptocurrency in the past 24 months must not be less than 500 billion.
• Execution Level: The Chief Accountant may enter into contracts with qualified custodians that possess cold wallet security custody technology and qualified liquidity providers that assist in asset purchase and management.
• Allow the use of derivatives: If it benefits the reserves, the comptroller may use derivatives.
• Establish an advisory committee: composed of five members, responsible for asset valuation advice and investment policy design, etc.

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

Representative Giovanni Capriglione, who participated in the drafting of the bill, stated that this initiative is a continuation and supplement to the existing precious metals reserve policy. He believes that Bitcoin and precious metals are functionally complementary, both providing scarce, valuable resources that can be transferred between individuals, and both serve as effective means to combat inflation.

State-level "Policy Labs" Accelerate Implementation

With the federal government issuing administrative orders related to Bitcoin strategic reserves, state governments are also actively promoting relevant legislation. Giovanni believes that the federal system in the United States allows states to become "policy laboratories" where new policies can be tested more quickly and in closer alignment with public opinion.

Zack Shapiro, a lawyer at the Bitcoin Policy Institute, pointed out that the core significance of Strategic Bitcoin Reserves (SBR) lies in preserving the value of public funds, combating inflation, and ensuring that state governments can fulfill their obligations in the future. The specific implementation methods may vary among states, with some possibly integrating Bitcoin into existing portfolios or attempting more cutting-edge financial instruments.

The public bidding for custodians is imminent

Lee Bratcher, the chairman of the Texas Blockchain Council, revealed that they are assisting interested crypto companies in connecting with the Texas Treasury Safekeeping Trust Company (TTSTC), and a transparent public bidding process will be initiated subsequently. They hope to directly custody physical Bitcoin and hold the private keys, rather than simply purchasing ETFs.

The SB21 bill 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 TTSTC will need a certain learning process to evaluate the various options.

This innovative initiative marks an acceleration of exploration by U.S. states in the field of digital assets, providing valuable reference experience for other regions.