
Three of the 50 states in America are poised to establish local Bitcoin reserves in the near future. These bills showcase local particularities and differ from the American National Bitcoin Reserve proposal.
The enthusiasm for Bitcoin is palpable in America. Reportedly, one in five Americans owns some BTC. While the U.S. President advocates for a strategic Bitcoin reserve, individual states are pursuing their own local reserves. Proposals from Ohio and Texas are nearing approval, with Pennsylvania following suit, while other states are in deliberation.
What distinguishes the local proposals from the federal bill?
The primary difference is that the local bills have distinct objectives compared to the federal-level proposal. The federal bill aims to address the national debt and includes a plan to acquire one million BTC to be held in the U.S. Treasury.
The Texas bill focuses on accumulating bitcoins via taxation and donations made in cryptocurrency. Additionally, Texas enforces a minimum five-year holding period for state bitcoins. Ohio and Pennsylvania intend to amass BTC as a safeguard against the declining value of the USD, with local treasuries responsible for purchasing bitcoins. The specifics regarding the purchase terms remain unclear in the bills.
The Cynthia Lummis bill
The Federal Reserve bill was introduced in July 2024 by Wyoming Senator Cynthia Lummis. Her initiative is referred to as the Boosting Innovation, Technology and Competitiveness through Optimized Investment Nationwide (BITCOIN) Act. Lummis frames the bill as a strategy to alleviate the U.S. national debt.
In addition to addressing national debt, Lummis highlights rising inflation rates in her introduction, calling the establishment of the reserve a “Louisiana Purchase moment.” This comparison between large-scale Bitcoin acquisitions and the historic purchase of American land has become a popular narrative among Bitcoin advocates.
The proposal views Bitcoin as an alternative store of value for the federal balance sheet. It advocates for the creation of a decentralized network of Bitcoin vaults managed by the U.S. Treasury. Furthermore, the bill stipulates the government must acquire one million BTC, which represents roughly 5% of the total supply. This figure aligns with the U.S. already holding 5% of all gold. The bill also ensures private Bitcoin holders retain self-custody rights.
The local bills
The local bills from Texas and Ohio do not explicitly aim to purchase a predetermined amount of BTC within a specific time frame or to reduce state debts.
The Texas bill was introduced by State Representative Giovanni Capriglione on Dec. 12. The legislation allows residents to utilize cryptocurrency for tax payments. Moreover, Texans will have the opportunity to donate cryptocurrency to the state, which will be converted into Bitcoin.
The main channels for Texas to gather bitcoins will include taxes, donations, and other payments made to state agencies. The Bitcoin collected will be securely stored offline for a minimum of five years. Echoing Lummis’s sentiments, Capriglione acknowledged inflation as a significant concern when advocating for the Bitcoin reserve. Texas has attracted Bitcoin miners due to its low electricity rates and various benefits.
During a CNBC interview broadcast on Dec. 24, Eli Cohen, general counsel of Centrifuge, remarked that implementation might present challenges. He noted that tax authorities could struggle to collect taxes in BTC and track taxpayers effectively. If tax authorities require taxpayers to reveal their BTC wallets, there may be hesitation to comply.
On Dec. 17, Representative Derek Merrin put forth the Ohio Bitcoin Reserve Act. This act proposes that the Ohio treasury will establish a Bitcoin fund and will be authorized to invest in Bitcoin. Bitcoin is viewed as a safeguard against USD depreciation. Unlike the Lummis proposal, the Ohio bill does not specify any intended Bitcoin allocations or purchases. As of 2022, Ohio’s debt stood at $72.16 billion, which suggests that a BTC reserve could help in debt alleviation. Legislators will further refine the bill in 2025.
The Pennsylvania bill was introduced in November, proposing that the state be allowed to invest up to 10% of its State General Fund in Bitcoin to combat inflation. This implies that nearly one billion dollars could be allocated to Bitcoin purchases.
Will these bills be approved?
The aforementioned bills have been introduced, but their passage is not guaranteed. Statistically, only around 20% of state-level bills make it into law. This percentage is even lower in Texas, Ohio, and Pennsylvania. Historical data shows that only 4.5% of bills introduced to the 115th Congress became laws. Consequently, the chances appear slim. Ultimately, the outcome hinges on several factors, including the dedication of lobbyists. Cohen believes Lummis has significant expertise as a Bitcoin advocate, providing her bill with a better chance of success.
Nonetheless, the Lummis Act could falter in Congress, receiving criticism even from within the crypto community. For example, crypto commentator Nic Carter cautions that while a Bitcoin stockpile derived from seized assets may be advantageous, a strategic Bitcoin reserve created from government acquisitions could negatively impact the dollar’s value, contrary to the beliefs of some reserve advocates.
The rationale is apparent: implementing Bitcoin as a monetary asset within a dollar-issuing nation sends a signal against an inconvertible fiat standard, potentially undermining the dollar’s value and endangering the U.S.’s standing in the global economy. However, it is essential to note that Carter’s views are not necessarily the mainstream perspective.
If the strategic Bitcoin reserve fails to materialize but state-level reserves succeed, these local initiatives could emerge as leaders in exploring governmental Bitcoin acquisition and storage, establishing themselves as prominent cryptocurrency hubs. Should all bills falter, new proposals are likely to follow.