Lawmakers in states across the country are considering dipping their toes into the cryptocurrency world, wading into the volatile new marketplace of alternative currencies as the Trump administration pledges to promote the industry by reducing restrictions.
The Texas Senate earlier this month approved legislation that would establish the Texas Strategic Bitcoin Reserve, managed by the state comptroller. The Arizona Senate approved a bill in February to allow the state treasurer to invest up to 10% of state money in virtual currencies.
An Oklahoma House committee advanced legislation that both creates a bitcoin reserve and allows investments in alternative currencies of up to 10%. This month, a New Hampshire House committee approved a bill allowing the state treasurer to allocate up to 5% of public funds into Bitcoin.
Similar bills have been referred to committees in 15 other states. Some vary in the share of state dollars they would allow to be invested in cryptocurrencies, while others specify which pots of money can be used to invest — Maryland’s version would use fines collected from those who commit gambling violations, while New Mexico’s version would allow the treasurer to pick from three different funds, including tobacco settlement money and the Severance Tax Permanent Fund.
The new measures come as the Trump administration launches a Crypto Strategic Reserve, which would allow the country to buy and sell crypto assets.
Lawmakers who back the legislation, most of whom are Republicans, say investing in an alternative currency is a necessary hedge against inflation caused in part by the federal government’s ballooning deficit.
“Bitcoin offers unique advantages in the digital era [due] to its limited supply and decentralized nature, in contrast to the federal government, which has an unlimited printing press and centralized control of the currency,” Texas Sen. Charles Schwertner (R) told colleagues in a floor debate last month. “In my opinion, the dollar is in decline because of the spendthrift manner in which our federal budget has been handled over many many decades by many many administrations.”
Read more: Texas lawmaker introduces bill to create strategic bitcoin reserve
Skeptics say the currency is far too volatile, and too much of a risk, for state investment strategies, which are typically extremely conservative. The price of Bitcoin has fluctuated in the past year from a low of $53,857 in September to a high of $106,490 in December, before sliding to $81,435 on Tuesday.
“Bitcoin is not countercyclical. When the economy is bad, it is down,” Texas Sen. Roland Gutierrez (D), who voted against the bill, said on the floor. “It is very volatile.”
Gutierrez said he was skeptical of the technology — and the people — behind cryptocurrencies.
“We’re supposed to allow that algorithm, that computer and a few dudes named Chuck, I dunno, some crypto bros to regulate themselves?” he asked incredulously.
One common theme among the bills is that they limit the specific cryptocurrencies a state could invest in to those that have market capitalizations of more than $500 billion, in Texas and Oklahoma, or more than $750 billion, in Ohio.
While the Trump administration’s crypto reserve can hold five different coins, the market cap provision effectively limits the number of currencies a state could invest in to one: Bitcoin, which has a market cap of $1.6 trillion as of Tuesday afternoon, according to Forbes. Ethereum, the second-largest cryptocurrency by market cap, is valued at $226 billion.
Dennis Porter, chief executive of Satoshi Action, the cryptocurrency interest group that has been shopping model legislation to lawmakers across the country, said that provision is intentional.
Because Bitcoin specifically is run on a decentralized blockchain, it does not allow a single person or a small group of people to make changes to the underlying technology that could introduce volatility that could harm a state’s investment.
“Bitcoin cannot be altered or changed in ways that can alter the value and supply,” Porter said in an interview. “You know forever that you’re going to have your one out of 21 million Bitcoins. They’re not going to be able to inflate the supply or make radical changes that would impact the state directly.”
Even if the measures win passage, there is no guarantee that states will rush headlong into crypto speculation. The bills allowing state treasurers to invest in alternative currencies do not actually direct them to do so. And treasurers, who manage billions in pension funds, retirement accounts and other public monies, are traditionally conservative in their approach to risk.
“States have traditionally played it safe with their investments, sticking to low-risk, stable assets,” said Lucy Dadayan, a state budget expert at the Urban-Brookings Tax Policy Center. “The idea of cryptocurrency reserves is a clear departure from traditional, conservative investment strategies. While crypto offers the potential for big gains, it also brings volatility and, more importantly, regulatory uncertainty.”
Dadayan said the volatility in the crypto markets could, in a worst-case scenario, impact public services, pensions and emergency funds while exposing taxpayers to risk without their knowledge.
Porter, of Satoshi Action, said Bitcoin’s success over the last decade could help governments hedge against inflation.
“The basic premise is that the dollar has lost roughly 25% of its purchasing power since 2018 alone, and that’s really bad for state budgets,” he said. States “eventually have to raise taxes or cut programs. The alternative is to try to defend the purchasing power of those dollars, and one way to do that is to invest in Bitcoin.”
He said the proliferation of Bitcoin-related bills this year — at least 88 bills have been introduced in 35 states, and 38 bills related to strategic Bitcoin reserves in 23 states — shows lawmakers are taking notice of what other states are doing.
“The more legislation we pass, the more lawmakers are going to be reaching out to us,” he said. “They’re reaching out to us, sliding into our DMs.”
Austin Jenkins contributed reporting.