In recent news, lawmakers in Texas have put forward their intentions to adopt a digital currency, but they are not interested in a dollar-backed CBDC. Instead, they want a digital currency that could be exchanged for gold and cash.
Senate Bill 2334, introduced by Senator Bryan Hughes, and House Bill 4903, introduced by Representative Mark Dorazio, collectively represent the first proposal for a state currency not backed by the dollar but by gold.
Sources reveal that Republican Senator Bryen Hughes submitted Senate Bill 2334, which proposed the Texas Comptroller create the asset, with its value represented by a fraction of a troy ounce of gold (one troy ounce is equivalent to 31.1 grams). Quoting him:
The comptroller shall establish a digital currency backed by gold so that each unit of the digital currency issued represents a particular fraction of a troy ounce of gold held in trust.
The proposed bill also has a provision that mandates the comptroller to establish a means for digital currency holders to enable them to easily transfer or assign the asset to others through any payment system.
Additionally, the bill states that the comptroller will act as a trustee and fiduciary on behalf of digital currency holders, maintaining “sufficient gold to provide gold redemption for all units of the digital currency that have been issued and not yet redeemed for money or gold.”
According to the bill, the currency reserves must be 100% backed in gold and to prevent manipulation of the liquidity of the asset, lawmakers have also implemented preventive measures.
Even though unlimited purchases are allowed, the comptroller has to acquire the same fractional amount in troy ounces of gold to ensure its backing and stability to avoid any potential imbalance in the supply and demand of the proposed digital currency. As the bill stated:
[The Controller should] buy a fractional number of troy ounces of gold equal to the number of units of the digital currency issued to the purchaser, and issue the purchaser several units of the digital currency equal to the amount of gold the comptroller purchases with the money received from the purchaser.
Hence, whenever a buyer wishes to sell their assets, the controller or the entity in charge must provide an equal amount in cash to cover the funds. In addition, sellers who wish to exchange the coins for physical gold can do so via designated agents, who will provide the equivalent value in small gold coins or large bars.
The comptroller, or a person with whom the comptroller has contracted, or a person serving as a trustee for purposes of this chapter, may manage redemption of the digital currency for gold using bars or coins of standard sizes and may pay fractional remainders in cash as necessary to facilitate the transaction.”
At the moment, the bill requires approval at the Committee hearing before becoming official law and gaining State Senate and House approval. However, these projects show Texas’ interest in returning to the gold standard, which boosted the US economy and trade for several years.
Texas has been a pro-crypto state with the state authorities wanting to embrace the industry and the technology it has to offer. However, while the approach of the Texas lawmakers has mostly been in favor of the crypto sector, recent incidents have shown a different stance.
Previously, Cody Harris, a Texas House of Representatives member, proposed a Right to Mine bill. Harris asked his fellow lawmakers to rise in support of miners and “express support for protecting individuals who code or develop on the Bitcoin network.”
However, on Tuesday, the Texas Senate came one step closer to reaching an agreement about Senate Bill 1751. Sources suggest that the bill received unanimous approval from the Senate before moving to the House and the governor. The proposed bill seeks to regulate how Bitcoin miners can interact with the power grid, and how their earnings will be taxed.
Hence, it would be interesting to see what the lawmakers have in mind regarding the proposed gold-backed stablecoin. If approved, this would mark a phenomenal step from the authorities in favor of the digital assets. The lawmakers and states in the US have been hugely divided over their opinions of the subject.
Nonetheless, Texas is not the first state to propose a state-backed digital currency, Miami and New York have already tested the issuance of their official tokens. In August 2021, lawmakers proposed MiamiCoin (MIA), an alternative cryptocurrency that the city would store in a wallet and allow others to purchase.