State lawmakers pitch gold-backed cryptocurrency
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Legislation in Texas would establish a digital currency that could then be redeemed in cash or gold.
Legislation proposed in Texas would create a state-issued digital currency issued backed by gold, which residents could then fully redeem in cash or gold.
Identical bills introduced in the Texas House of Representatives and Texas Senate would require the state comptroller to create the currency, which would be 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,” according to the bills’ text.
The legislation, if passed, would also require the comptroller to create a way for residents to pay for transactions using the digital currency, transfer it to others or redeem it for cash or gold. Gold reserves associated with the currency would be held at the Texas Bullion Depository or at another place controlled by the comptroller.
The comptroller would be required to “maintain enough gold to provide for the redemption in gold of all units of the digital currency that have been issued and are not yet redeemed for money or gold,” per the legislation, with Texans not limited on the amount of digital currency they can purchase.
To redeem it for cash, the currency holder would need to present it to the comptroller or a designated agent, who would then sell the gold held in the depository equal to the amount being redeemed. In redeeming the digital currency for gold, Texans would receive gold bars or coins in standard sizes and could receive any fractional remainder of the redeemed amount in cash.
Gold purchased for the purpose of this digital currency would not be available to lawmakers for appropriation. It would be kept separate, while all fees generated from managing that fund and allowing Texans to redeem it would go into the state’s general fund.
Gold-backed cryptocurrency has apparently become more popular in some quarters as having it tied to tangible assets allegedly prevents the wild fluctuations in prices that have affected some cryptocurrencies in recent years. These gold-backed digital assets must be issued by companies or others who store physical gold in vaults, an effort that so far has been dominated by private companies.
While gold-backed cryptocurrencies are apparently protected from the crashes associated with some cryptocurrencies’ values, if the price of gold goes down, their value will be impacted.
This legislative effort comes on the heels of a report from the Texas Work Group on Blockchain Matters, which said in a report last year that the state should utilize blockchain technology to bolster its economy.
In that report, the work group called on the state to affirm the right of Texans to own cryptocurrency on their own account and not be prohibited from self-hosted wallets, which hold, store or transfer cryptocurrencies. The group also recommended a two-year retail sales tax holiday for direct cryptocurrency payments, and it urged legislators to consider codifying cryptocurrencies with a large market cap like Bitcoin as authorized state investments.
This latest legislation also comes amid some state-level concerns about the potential introduction of a federal digital currency, which some Republicans argue could weaponize the federal government and give it unprecedented access into Americans’ purchases. Florida Gov. Ron DeSantis recently announced legislation banning the use of any centralized digital currency in the state, although some have argued that this effort misconstrues a new electronic system run by the Federal Reserve designed to facilitate quicker electronic payments between banks.
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