Texas has risen in recent times as a contender for the most crypto-friendly state in the United States of America. While Washington continues to dally with adoption, and several other states are less welcoming, Texas is forging ahead.
Recently, several top names from the blockchain world and the regulatory and political landscapes converged at the Texas Blockchain Summit. The summit was organized by the Texas Blockchain Council, one of the most prominent blockchain advocacy bodies in the country.
At the conference, one thing was clear: Texas will be at the forefront of blockchain adoption and is laying the groundwork to get it done.
Making Steady Regulatory Amendments
Since the beginning of 2021, Texas has led several states in adopting a friendly approach toward cryptocurrencies; but things have ramped up in the second quarter. We got a clear glimpse of this in early September when the state’s legislature passed two bills to improve Bitcoin’s standing in commercial law.
The bills, tagged Texas House Bill 1576 and Texas House Bill 4474, were signed into law by Governor Greg Abbott in June. House Bill 1576 establishes a blockchain working group in Texas, while Bill 4474 amends Texas’s Uniform Commercial Code (UCC) to make a clear definition of Bitcoin under the state’s commercial law.
Speaking to news sources at the time, Lee Bratcher, the Texas Blockchain Council’s president, explained that Bill 4474 better defines Bitcoin and other cryptocurrencies as securities that allow institutional investments - even the most sizable ones.
Bratcher’s statement makes sense, since banks can now hold Bitcoin in Texas. Back in June, the Texas Banking Commissioner and the Texas Department of Banking announced that banks with a state charter can hold Bitcoin. There are conditions for the custody, but the announcement was significant, nonetheless.
House Bill 4474 also adopts proposed language for the UCC. The UCC Article 12 is expected to be finalized next year, although states can adopt the proposed language now. A policy expert explained the text of House Bill 4474 primarily does three things:
First, the bill defines virtual currency, while also demonstrating how to prove control over a piece of virtual currency. Last, it establishes how virtual currencies can be a security interest - an important factor for companies looking to do business with virtual currencies.
To understand it better, Joseph Kelly, the chief executive of Bitcoin financial services firm Unchained Capital, explained that the company and its clients now have better legal clarity over several activities - including buying Bitcoin and using it as collateral for credit facilities. Before House Bill 4474, Bitcoin was considered too different from traditional assets.
Previous laws were ill-suited to handle Bitcoin, especially in relation to commercial transactions. With unclear definitions, parties to Bitcoin transactions were not ensured proper protection; now, the protections are much better.
More on the Way
While Texas appears even more crypto-friendly, the Texas Blockchain Council remains committed to bigger plans. Bratcher has told industry news sources that discussions are already underway to include Bitcoin in Texas’s Constitution.
Bratcher pointed out the Texas Constitution has already been amended hundreds of times; so, Bitcoin should gain inclusion with a constitutional amendment. Bratcher specifically referenced a constitutional amendment that allows people and companies to pay property taxes in Bitcoin. This could give Bitcoin the same standing as alternative assets, like gold, in the eyes of the Texas Comptroller and the State Treasury.
For now, a proposal of such magnitude isn’t set in stone. Bratcher said it will most likely appear on the state ballot in 2023. Still, the Texas Blockchain Council remains committed to this development.
A Move to Take Miners In
Besides constitutional amendments favoring Bitcoin, Texas is doing a great deal in the mining space. At the Texas Blockchain Summit, Foundry USA, one of the world’s largest Bitcoin mining pools, demonstrated the state’s position as fourth in hashrate throughout the country.
Texas now has 14 percent of the total hashrate in the United States, trailing New York, Georgia, and Kentucky. Foundry USA admits its data contains some room for inaccuracy. Not every mining outfit uses its mining pool, so their data was excluded.
For instance, Riot Blockchain, a publicly-traded Bitcoin mining firm and one of the largest in North America, was left out of the data because it doesn’t use Foundry USA. Riot is headquartered in Texas and has a massive operation in the state. So, with its operations excluded, Texas’s numbers might be a bit understated.
Texas has been a home for Bitcoin miners for quite a while. Companies like Bitmain have set up shop in the state, taking advantage of the vast expanse of land and availability of power. This is especially attractive to miners and mining companies, who need a lot of resources to thrive.
For Texas, the next logical step is creation of a stable and enabling environment for mining outfits to operate more freely. This includes rules for resource allocation and use, as well as operational guidelines. With China seeing miners leave the country en masse, Texas could be the home these entities have been looking for.