Texas, Ohio, and Pennsylvania to create Bitcoin reserves

Three of America’s 50 states are expected to establish local Bitcoin reserves soon. The bills differ from the proposal of the American National Bitcoin Reserve and show local features.

America is optimistic about Bitcoin. Allegedly, one in five Americans owns some BTC. While the US President strives to create a strategic Bitcoin reserve, states are also working on local reserves. Ohio and Texas’ proposals to create such reserves are about to become law; While Pennsylvania follows their lead, other states are making their own assessments.

How do the local proposals compare to the federal bill?

The main difference is that local proposals have different end goals compared to the proposal at the federal level. The federal bill is intended to cover the national debt and calls for the purchase of one million BTC, which should be kept in the US Treasury.

Texas bill aims to accumulate bitcoin by collecting taxes and donations in cryptocurrency. Moreover, Texas has at least a five-year embargo on selling state Bitcoins. Ohio and Pennsylvania are ready to accumulate some BTC to hedge against eroding USD value. Bitcoins need to be purchased by local treasuries. The drafts do not contain detailed information about the conditions.

Bill by Cynthia Lummis

The Federal Reserve bill was introduced in July 2024 by Wyoming Senator Cynthia Lummis. His proposal is called Enhancing Innovation, Technology, and Competitiveness Through Nationwide Optimized Investment (BITCOIN) Act. The Lummis bill is clearly presented as a way to pay off the US national debt.

In his introduction, Lummis discusses the national debt as well as rising inflation rates and describes the creation of the reserve as the moment of the Louisiana Purchase. Comparing past large-scale Bitcoin purchases to the purchase of American territory has become a popular trope among Bitcoin maximalists.

Under Lummis’ proposal, Bitcoin is seen as an additional store of value on the federal balance sheet. The bill suggests that the government should establish a decentralized network of Bitcoin vaults controlled by the US Treasury. On top of that, the government needs to purchase one million BTC, which is about 5% of the total supply. This amount is based on the fact that the United States currently holds 5% of all gold. Private Bitcoin owners should be given custodial rights.

local bills

Texas and Ohio’s local bills do not contain a direct intention to purchase a certain amount of BTC in a certain period, nor do they aim to eliminate government debt.

The Texas bill was introduced by Texas State Representative Giovanni Capriglione on December 12. The bill suggests that local residents can use cryptocurrency to pay their taxes. Moreover, Texans will be able to donate cryptocurrency to the state. All cryptocurrencies will be replaced with Bitcoin.

Donations to government agencies, taxes and other payments will be the main ways Texas accumulates bitcoin. The accumulated BTC must be stored offline untouched for at least five years. Just like Lummis, Capriglione also stated that inflation is one of the biggest enemies when talking about the need for Bitcoin reserves. Texas has become an attractive location for Bitcoin miners due to low electricity costs and various incentives.

In a CNBC interview published Dec. 24, Centrifuge general counsel Eli Cohen noted that implementation can be challenging. He points out that tax authorities may find it difficult to collect taxes and identify taxpayers in BTC. If tax authorities require taxpayers to provide their BTC wallets, taxpayers may feel reluctant to comply with the request.

🚨Today I filed for HB 703 to create an Ohio Bitcoin Reserve within the state treasury!

Provides the state treasurer with investment authority and flexibility #Bitcoin

This legislation creates a framework for the Ohio state government to leverage the power of Bitcoin to empower us… pic.twitter.com/hSWas2qeQd

— Derek Merrin (@DerekMerrin) December 17, 2024

Representative on December 17th. Derek Merrin introduced the Ohio bill known as the Ohio Bitcoin Reserve Act. The law suggests that the Ohio treasury will establish a Bitcoin fund and invest in Bitcoin. Bitcoin is seen as a hedge against USD devaluation. Unlike Lummis’ proposal, the bill does not mention specific Bitcoin purchases or allocations. In 2022, Ohio had $72.16 billion in debt. It is possible that the BTC reserve will facilitate debt redemption. The bill will be further studied by legislators in 2025.

The Pennsylvania bill was introduced in November. His main proposal is that the government could invest up to 10% of the State General Fund in Bitcoin to combat inflation. This means that around a billion dollars could be spent on bitcoins.

Will these bills pass?

The draft laws mentioned above have been submitted. There is no guarantee that they will pass. On average, only 20% of bills introduced at the state level become law. In Texas, Ohio and Pennsylvania, the number is even lower. According to the New Health Bill, only 4.5 percent of the bills submitted to the 115th Congress became law. So statistically the rates are not that high. Practically, this depends on many factors, especially the persistence of lobbyists. Cohen believes Lummis is a strong Bitcoin advocate with good experience and his bill has a good chance.

But the Lummis Act may fail in Congress. It is receiving some criticism even within the crypto community. For example, passionate crypto writer Nic Carter warns that a Bitcoin stockpile (as a repository of seized bitcoins) may be useful, but a strategic Bitcoin reserve (as a reserve of government-acquired bitcoins) will not support the dollar price (as strategic Bitcoin reserve advocates assume) but will do the opposite .

The reason for this is clear: Giving Bitcoin a monetary role in the dollar-minting country signals a move away from the inconvertible fiat standard, calling the value of the dollar into question, thus putting the US role in the global economy at risk. But we can’t say that Carter’s concerns are the current mainstream. Quite the opposite.

If the strategic Bitcoin reserve is not established while state-level reserves are successfully identified, they can take a leading role in the exploration of government accumulation and storage of Bitcoin and develop into international cryptocurrency centers. If all bills fail, new ones will follow.