Key Points
- Three states in the U.S. are planning to establish local Bitcoin reserves.
- The proposals from Ohio, Texas, and Pennsylvania differ from the national Bitcoin reserve bill.
Three states within the United States are on the brink of developing their own Bitcoin reserves. The specific proposals for these reserves differ from the American National Bitcoin Reserve proposal, reflecting the unique circumstances of each state.
Bitcoin in the United States
The popularity of Bitcoin is growing in America, with an estimated one in five Americans owning some amount of the cryptocurrency. While the U.S. President is advocating for a strategic Bitcoin reserve on a national level, individual states are working on their own local reserves. Both Ohio and Texas are close to passing their proposals for such reserves, with Pennsylvania not far behind. Other states are also considering similar measures.
Local Proposals vs Federal Bill
The local proposals differ from the federal bill in their end goals. The federal bill aims to address the national debt by purchasing one million Bitcoin to be stored in the U.S. Treasury. The Texas bill, on the other hand, plans to accumulate Bitcoin through taxes and donations in cryptocurrency, with a minimum five-year embargo on selling the state’s Bitcoin. Ohio and Pennsylvania aim to acquire Bitcoin as a hedge against the declining value of the U.S. dollar, with purchases to be made by local treasuries.
The federal bill, introduced by Wyoming Sen. Cynthia Lummis in July 2024, is known as the Boosting Innovation, Technology and Competitiveness through Optimized Investment Nationwide (BITCOIN) Act. The Lummis bill views Bitcoin as an additional store of value in the federal balance sheet and proposes the establishment of a U.S. Treasury-controlled network of Bitcoin vaults. The government is also urged to purchase one million Bitcoin, equivalent to about 5% of the total supply.
Local Bills
The local bills from Texas and Ohio do not specify a certain amount of Bitcoin to be purchased within a certain timeframe, nor are they aimed at eliminating state debts. The Texas bill, introduced by Texas State Representative Giovanni Capriglione, allows residents to use cryptocurrency to pay their taxes and make donations to the state. All collected cryptocurrency will be exchanged for Bitcoin.
The Ohio bill, introduced by Rep. Derek Merrin, proposes the establishment of a Bitcoin fund by the Ohio treasury, which will be able to invest money in Bitcoin as a hedge against USD devaluation. The Pennsylvania bill, introduced in November, allows the state to invest up to 10% of the State General Fund in Bitcoin to combat inflation.
Passage of the Bills
While these bills have been introduced, their passage is not guaranteed. On average, only 20% of introduced state-level bills become laws. In Texas, Ohio, and Pennsylvania, this rate is even lower. However, the outcome will depend on a variety of factors, including the persistence of lobbyists advocating for the bills.
The Lummis Act, in particular, has received some criticism from within the crypto community. Some argue that while a Bitcoin stockpile can be beneficial, a strategic Bitcoin reserve may not bolster the dollar price as intended, but could have the opposite effect. This is because giving Bitcoin a monetary role in a country that issues dollars could signal a move away from an inconvertible fiat standard, potentially jeopardizing the U.S.’s role in the global economy.
If the strategic Bitcoin reserve is not established while state-level reserves are successfully set up, these states could become leading figures in the exploration of governmental accumulation and storage of Bitcoin, potentially transforming into international cryptocurrency hubs. If all the bills fail, it is expected that new ones will follow.
