Texas has initiated its Strategic Bitcoin Reserve by purchasing $5 million worth of bitcoin, marking the first such investment by a state government. The buy, made in November, comes as the state embraces cryptocurrency amid booming mining operations. Critics question the volatility of the asset, while supporters see it as a forward-looking move.
In a pioneering step, Texas Comptroller’s Office confirmed a $5 million purchase of bitcoin last month to kickstart the state's Strategic Bitcoin Reserve. Lawmakers had earlier this year allocated $10 million for the reserve, with this initial buy serving as a placeholder investment while securing a cryptocurrency bank for management. The transaction occurred on the morning of November 20, when bitcoin traded at $91,336 per unit. By Friday afternoon, the price had dipped to $89,406, reflecting ongoing volatility since its all-time high of $126,080 in early October.
Acting Comptroller Kelly Hancock emphasized the initiative's significance: “The Texas Legislature passed a bold mandate to create the nation’s first Strategic Bitcoin Reserve. Our goal for implementation is simple: build a secure reserve that strengthens the state’s balance sheet. Texas is leading the way once again, and we’re proud to do it.” This $5 million represents half the appropriated funds and a tiny fraction of Texas's $338 billion budget.
Texas stands out as the first state to fund such a reserve, though Arizona and New Hampshire have passed enabling laws without purchases. Wisconsin and Michigan invested pension funds in cryptocurrency last year. The move aligns with Texas's crypto-friendly environment, hosting at least 27 bitcoin mining facilities—the world's largest concentration—and the two biggest such operations globally. Since China's 2021 mining ban and Governor Greg Abbott's welcoming stance, rural counties have attracted these energy-intensive sites.
However, the industry faces scrutiny. Crypto mines consumed 2,717 megawatts in 2023, enough to power 680,000 homes, contributing to a 5% rise in electric bills or $1.8 billion annually, per a Wood Mackenzie study. Local complaints include noise and unfulfilled job promises. University of Houston economist Ed Hirs warned of bitcoin's risks: “The ordinary mix in investing is one that goes away from volatility. Once the public decides this really has no intrinsic value, then it will be over, and taxpayers will be left holding the bag.”
Texas Blockchain Council President Lee Bratcher countered that bitcoin's 16-year upward trend justifies the bet: “It’s only a 16-year-old asset, so the volatility... will smooth out over time.” State Senator Molly Cook, who opposed the fund, argued for investments in healthcare and education over “gambling our money on something... known to be really volatile.” Author of the bill, Senator Charles Schwertner, said it positions Texas to “lead and compete in the digital economy.”