SB21 - Relating to the establishment and administration of the Texas Strategic Bitcoin Reserve for the purpose of investing in cryptocurrency and the investment authority of the comptroller of public accounts over the reserve and certain other state funds.

      S.B. No. 21         AN ACT   relating to the establishment and administration of the Texas   Strategic Bitcoin Reserve for the purpose of investing in   cryptocurrency and the investment authority of the comptroller of   public accounts over the reserve and certain other state funds.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  This Act may be cited as the Texas Strategic   Bitcoin Reserve and Investment Act.          SECTION 2.  Chapter 403, Government Code, is amended by   adding Subchapter V to read as follows:   SUBCHAPTER V.   TEXAS STRATEGIC BITCOIN RESERVE           Sec. 403.701.  DEFINITIONS. In this subchapter:                 (1)     "Airdrop" means a gratuitous distribution of   cryptocurrency to persons who hold cryptocurrency, generally made   in a broad, equitable, and nondiscretionary manner.                 (2)     "Bitcoin" means a type of decentralized   cryptocurrency created by a peer-to-peer network that operates   independently of any central authority or bank.                 (3)     "Cold storage" means a method of storing private   keys required to engage in transactions involving cryptocurrency   that:                       (A)  has a nexus to a secure physical location;                       (B)  is protected from unauthorized access; and                       (C)     is isolated from any Internet network   connections.                 (4)     "Cryptocurrency" means a type of virtual currency   that utilizes cryptography to secure transactions that are   digitally recorded on a distributed ledger, such as a blockchain.                 (5)     "Fork" means a change to the consensus mechanism   of a distributed ledger that creates a separate ledger, which may   result in a new cryptocurrency that shares a common transaction   history with the previous cryptocurrency up to the point of the   change.                 (6)     "Qualified custodian" means a state or federally   chartered financial institution or other entity regulated by this   state that has custody of a virtual currency.                 (7)     "Reserve" means the Texas Strategic Bitcoin   Reserve established under this subchapter.                 (8)     "Virtual currency" has the meaning assigned by   Section 12.001, Business & Commerce Code.           Sec.   403.702.     LEGISLATIVE FINDINGS; PURPOSE. The   legislature finds that:                 (1)     bitcoin and other cryptocurrencies are assets with   strategic potential for enhancing this state's financial   resilience;                 (2)     bitcoin and other cryptocurrencies can serve as a   hedge against inflation and economic volatility; and                 (3)     the establishment of a strategic bitcoin reserve   serves the public purpose of providing enhanced financial security   to residents of this state.           Sec.   403.703.     ESTABLISHMENT AND ADMINISTRATION OF RESERVE.   (a) The Texas Strategic Bitcoin Reserve is established as a special   fund outside the state treasury. The comptroller has custody of and   shall administer and manage the reserve. The reserve consists of:                 (1)     money transferred or deposited to the credit of   the reserve by legislative appropriation;                 (2)     revenue that the legislature by general law   dedicates for deposit to the credit of the reserve;                 (3)     subject to Section 403.704, bitcoin and other   cryptocurrency purchased using money in or received by the reserve,   including any cryptocurrency:                       (A)     derived from the fork of a distributed   ledger; or                       (B)     distributed pursuant to an airdrop to the   state's cryptocurrency addresses; and                 (4)     investment earnings and interest or rewards earned   on assets in the reserve.           (b)     In its administration and management of the reserve, the   comptroller may acquire, exchange, sell, supervise, manage, or   retain any kind of investment that a prudent investor exercising   reasonable care, skill, and caution would acquire, exchange, sell,   supervise, manage, or retain in light of the purposes, terms,   distribution requirements, and other circumstances then prevailing   for the reserve, taking into consideration the investment of all   the assets of the reserve rather than a single investment.           (c)     The legislature may appropriate funds for deposit to the   credit of the reserve for the purposes of:                 (1)  investing in bitcoin or other cryptocurrency; and                 (2)  administering and managing the reserve.           (d)     The comptroller may spend bitcoin or other   cryptocurrency in the reserve or use the net proceeds from the sale   of bitcoin or other cryptocurrency in the reserve to pay the   reasonable costs associated with administering and managing the   reserve.           (e)     Money in the reserve may be invested with the state   treasury pool.           (f)     Except as provided by Section 403.706, the comptroller   may not transfer money in the reserve to the state treasury unless   authorized by the legislature in the General Appropriations Act or   another law.           Sec.   403.704.     MARKET CAPITALIZATION REQUIREMENT. Bitcoin   or other cryptocurrency purchased using money in the reserve must   have an average market capitalization of at least $500 billion over   the most recent 24-month period.           Sec.   403.705.     THIRD-PARTY CONTRACTS AND PERMISSIBLE   TRANSACTIONS; AUDITS.   (a)   The comptroller may contract with one or   more third-party entities for the administration or management of   the reserve, including contracting with:                 (1)     a qualified custodian who employs secure custodial   technologies, including cold storage; and                   (2)     a qualified liquidity provider to facilitate the   purchase and management of assets in the reserve.           (b)     For purposes of Subsection (a)(2), "qualified liquidity   provider" means an entity that:                   (1)     is licensed or regulated under applicable federal   or state law;                   (2)     maintains audited financial statements prepared   by a regulated auditor;                   (3)     has at least five years of experience trading in   the digital assets industry;                   (4)     maintains an office and has a registered principal   in this state; and                   (5)     has certified in a method prescribed by the   comptroller that the provider meets the requirements of   Subdivisions (1)-(4).           (c)     If the comptroller determines it is in the best interest   of the reserve, the comptroller may use derivatives.             (d)     The comptroller may contract with a certified public   accountant to perform an independent audit of the reserve.           Sec.   403.706.     TEMPORARY TRANSFER FOR CASH MANAGEMENT. (a)   The comptroller may liquidate the reserve's assets and temporarily   transfer money from the reserve to the state treasury if necessary   for the purposes described by Section 403.092.           (b)     The comptroller shall, as soon as practicable after the   date of a transfer under Subsection (a), return the transferred   money to the reserve along with the interest, if any, earned on the   money while held in the state treasury.           Sec.   403.707.     TEXAS STRATEGIC BITCOIN RESERVE ADVISORY   COMMITTEE. (a) In this section, "committee" means the Texas   Strategic Bitcoin Reserve advisory committee.           (b)  The committee is composed of the following five members:                 (1)  the comptroller;                 (2)     one member of the comptroller's investment   advisory board established under Section 404.028, appointed by the   comptroller; and                 (3)     three members with expertise in cryptocurrency   investments, appointed by the comptroller.           (c)     The committee shall advise the comptroller regarding   the administration and management of the reserve, including:                 (1)     recommendations for valuing assets in the reserve;   and                 (2)     the establishment of prudent investment policies   relating to the investment objectives of and asset allocation in   the reserve.           (d)     A member of the committee is not entitled to receive   compensation for service on the committee or reimbursement for   expenses incurred in the performance of official duties as a member   of the committee.           (e)     Members of the committee appointed by the comptroller   serve at the will of the comptroller.           (f)  Chapter 2110 does not apply to the committee.           Sec.   403.708.     BIENNIAL REPORT. Not later than December 31   of each even-numbered year, the comptroller shall publish on the   comptroller's Internet website and submit to the legislature a   report that includes:                 (1)     the amount of bitcoin and other cryptocurrency   held in the reserve on the last day of the preceding state fiscal   biennium;                 (2)     an estimate of the monetary value of the bitcoin   and other cryptocurrency held in the reserve on the last day of the   preceding state fiscal biennium;                 (3)     the changes, if any, in the amount and estimated   monetary value of bitcoin and other cryptocurrency in the reserve   during the period the cryptocurrency has been held in the reserve,   disaggregated by cryptocurrency type; and                 (4)     a description of the actions taken by the   comptroller to administer and manage the reserve during the   preceding state fiscal biennium.           Sec.   403.709.     RULES. The comptroller may adopt rules as   necessary to administer this subchapter.     &#xA0 [Text truncated for display. Full text available on LegiScan.]