Texas has become the first state to invest in crypto assets.
The state has purchased around $5 million worth of bitcoin through an exchange-traded fund. The move was made possible by Senate Bill 21, which gave the state comptroller the authority to create a publicly funded strategic cryptocurrency reserve.
Trevor Bach, a North Texas business trends reporter for the Dallas Morning News, says the small investment reflects a belief in crypto’s potential for growth. Listen to the interview above or read the transcript below.
This transcript has been edited lightly for clarity:
Texas Standard: Tell us about Senate Bill 21 and the strategic cryptocurrency reserve.
Trevor Bach: So this was a a bill that passed at this year’s legislative session that essentially creates a strategic reserve, but it allows the comptroller’s office to set up a fund of crypto that is funded by the people of Texas, by the public.
And the larger context is that crypto has been surging for several years, obviously, sort of in a very public way – going more mainstream. And Texas has really made an effort to be at the forefront of that. And this is kind of another move by the state to establish itself as a leader in crypto.
Creating the reserve was controversial. What were the arguments for and against it?
People who support this and the politicians who support it will say that crypto, as an asset, has been surging, which is true if you look at over the past five years or longer. The value, of course, has shot way up. And so they say this is a smart move to make money for Texas.
And also, in a big way, okay, Texas is embracing this new industry as kind of part of a bigger tech push and trying to get more jobs and establish Texas as this leader in innovation and that kind of thing.
The argument against it, though, is that there are several, actually. One is that crypto, as an industry, has a lot of problems. There’s a huge energy cost. There’s environmental concerns. There’s quality of life issues related to mining, where the bitcoin mines are.
And then also, whether the state should really be involved in sort of propping up this industry in particular. Texas has long prided itself on being a fiscally conservative government, and then economists will say this is actually the opposite. This is a a risky asset. And then now you have the state that’s explicitly getting involved in sort of propping up this asset class.
Well let’s talk about that. So bitcoin has been a volatile investment with high highs and some pretty significant dips. Have you heard concerns about investing public money in this asset?
The concern is this could obviously crash, right? So I think the price now is $85,000 (per bitcoin) or so, but earlier this year it was well above $100,000, so there’s a dip there. But if you look longer term, it’s way up.
But looking ahead two years or five years, nobody knows where the price is gonna be. So the state’s investment here could go way up. It could also crash. And I think nobody can say with any confidence what’s actually gonna happen to it.
Of course the advocates will say, “OK, look at the lifespan of bitcoin or crypto.” And over the long term, the argument is that this is a solid investment. That’s a big push as part of this.
So now that the comptroller’s office has purchased bitcoin, is this $5 million just the beginning of a larger project? And how much money does the state plan to invest?
So when this bill passed, there was not funding attached to it. And then later the Legislature appropriated $10 million that can go into this for now.
So the initial purchase late last month was for around $5 million, the comptroller’s office told me, which is obviously a lot of money to somebody like me. But for the state of Texas, it’s tiny. And so even $10 million is really sort of a fraction, obviously, of the state’s larger funds.
Of course, even if it increases, bitcoin is not gonna represent a large share of the state’s funding or assets. That’s not really gonna happen.
But the other side of that is that advocates of this are saying, OK, it’s a symbolic move in a way, too – that they want to send a message to the industry that Texas is pro-crypto and Texas wants the industry here and there’s that argument among proponents as well.
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