Texas Governor Signs SB 21 Into Law

Finally, Texas Governor Greg Abbott has signed SB 21 into law, incorporating Bitcoin reserves into the state’s legal framework. The reserve will become a state-managed fund that holds BTC as part of the state’s commitment to financial stability. According to the bill, the new reserve will operate independently of Texas’s general Treasury system, but will serve as a hedge against inflation.

The bill also clarifies that only assets with a market cap of $500 billion and above can be added to the reserve. This threshold is only met by Bitcoin for now. Apart from direct purchases, the reserve can grow through airdrops, investment gains, or public donations, while the fund’s performance will be reported every two years. The news comes after Abbott signed House Bill 4488, which excludes the reserve from being incorporated into the state’s revenue fund. By signing the SB 21 bill into law, Texas became the first state in the U.S. to commit public funds to a single Bitcoin reserve. 

Bitcoin Reserves Go Statewide As Texas Joins 

It’s no longer companies that are holding Bitcoin – the U.S. state governments are also becoming increasingly interested in having a Bitcoin reserve. Even the United States government has set up plans for a strategic Bitcoin reserve to diversify the country’s assets. This quiet, yet powerful move is reshaping institutional interest. Additionally, it’s emphasizing the role of Bitcoin as a long-term asset against currency devaluation and inflation.

By signing SB 21 into law, Texas became the third U.S. state to establish a Bitcoin reserve, joining Arizona and New Hampshire. The latter was the first state to take Bitcoin into its treasury after passing a landmark bill, HB 302. The bill allows the state to reserve 5% of its public funds in Bitcoin. The bill states that New Hampshire will use part of the state’s BTC, held in cold storage, for the rainy day.

The policy was cited as an inspiration for the ongoing statewide adoption of Bitcoin as a reserve asset and a broader part of crypto policy pushed by Donald Trump. Arizona recently passed SB 1025 in the Senate. Texas follows suit with its establishment of a Bitcoin Strategic Reserve aimed at safeguarding the state from federal monetary mismanagement. Texas is already home to some of the biggest mining firms in North America. With crypto-friendly policies and infrastructure in place, the state could become the crypto capital of the United States.

Is the Momentum Stopping?

Other states are moving in fast with similar bills. Illinois, Ohio, Kentucky, Florida, Missouri, and Pennsylvania are all discussing the establishment of a Bitcoin Strategic Reserve. Nothing has been concluded yet, but experts believe more states will join the queue for various reasons. 

First, it is a hedge against inflation and Fiat weakness. As federal debts increase and inflation bites harder, Bitcoin offers an alternative as a hedge against dollar weakness, thanks to its fixed supply and decentralized nature. Second is diversification. Bitcoin adds an uncorrelated asset to a portfolio, reducing long-term risks. 

Furthermore, holding Bitcoin indicates openness to tech innovation. With states like Texas positioning themselves as crypto-friendly jurisdiction, they are likely to see increased investment in the blockchain sector. This boosts competitiveness amongst other states that want to hold Bitcoin. Furthermore, it aligns with the Federal government’s directives on setting up a Bitcoin reserve. The Treasury movement is accelerating fast in the United States. 

What Does This Mean for Crypto?

The widespread adoption of a Bitcoin Reserve gives BTC institutional legitimacy. Additionally, it will lead to the creation of digital treasuries that govern spending and accountability. It will also create a demand pressure, where Bitcoin becomes more scarce in supply. 

Furthermore, this will increase the demand for more spot Bitcoin ETFs. The United States SEC approved 11 spot BTC ETFs on January 10, 2024, including BlackRock and Garyscale. More high-asset managers are expected to file spot Bitcoin ETFs before 2025 ends.