A positive move that offers a lot of potential benefits for the state
In a week when the national government of El Salvador voted to accept Bitcoin as legal currency, Bitcoin, Governor Greg Abbott and the Texas Department of Banking have followed suit. Texas is now a Bitcoin friendly state following an announcement made in the Dallas news on June 11th.
Source: Twitter
The Federal Government continues to flip-flop in formulating and enacting its stance towards Bitcoin. Janet Yellen, Jerome Powell and others in key positions within the Biden administration seem to get repeatedly distracted by bluster and rhetoric, resorting to the same tired headline statements - that it's a tool of criminals, it uses ridiculous amounts of energy, or that it's too volatile to play an active role in the monetary system.
Meanwhile, political leaders within states around the nation including Kentucky, Florida, Wyoming, Tennessee and now Texas are seeing the possibilities that Bitcoin offers, not just in bolstering the finances of their states, but as a means of encouraging economic growth too.
What does this mean for Texas?
Abbott has taken a similar stance as Miami mayor Francis Suarez, demonstrating a desire to position his state at the forefront of innovation and opportunity.
Suarez has been bullish about declaring his city Bitcoin-friendly and the city recently hosted the annual Bitcoin conference which brought around 50,000 Bitcoin enthusiasts, influence and industry leaders to the city in June.
Mayor Suarez has been evangelical about the possibilities that he believes that Bitcoin presents. Miami is exploring offering it as part of employee-payroll, offering citizens the means of paying bills, taxes and for services using Bitcoin as well as using it as an investment vehicle to protect city treasury from inflation. These are just a few uses that Texas may consider exploring as it embraces Bitcoin in practice.
The treasury angle is particularly significant in light of the relentless printing of additional dollars that has been carried out by the Fed in order to stimulate the ailing economy after Covid-19. The resulting inflation and a need to recoup this money (such as via Biden's new capital gains tax) will undoubtedly have fiscal implications across the country for years to come.
Bitcoin may be a means of enabling financial prosperity for the State, not just by investing, but also in drawing Bitcoin and cryptocurrency businesses to locate themselves in Texas too.
The opportunities presented by Bitcoin
City governments like Miami, Florida and Jackson, Tennessee have positioned themselves as serious Bitcoin mining hubs, and Texas has already proven a draw for such ventures, including the so-called HODL-Ranch in West Texas which enables the use of energy that would otherwise go to waste to run Bitcoin mining operations. Bitcoin mining is the process by which new Bitcoin are 'generated'. Mining also supports the global, decentralized network of computers that is the lifeblood of Bitcoin in itself.
Bitcoin is renowned to use a lot of energy in its mining. It's a feature that it is often criticized for, most recently by Democratic Senator Elizabeth Warren. However, Bitcoin miners are keen to explore ways of using more green and renewable energy to sustain their operations. Many Bitcoin mining operations worldwide use green and renewable energy sources already - around 74% of all energy used according to this survey by Coinshares.
In some instances, Bitcoin mining has actually proven a means of reducing emissions and lowering carbon costs from oil mining. Typically oil wells and refineries will 'flare' excess dry gas that is generated as a by-product from oil extraction and processing - by burning it on site. This polluting activity, together with the direct venting of methane can be avoided - the gas that would otherwise be burned is instead used to generate energy to power the mining rigs, which helps to avoid waste and pollution.
Gaz Prom, the Russian oil and gas corporation has recently announced its piloting of such an operation in West Siberia. There could be an opportunity to establish similar operations in Texas, particularly if state leaders were able to offer incentives to Bitcoin miners to do so in the state.
In Kentucky for example, the state governor has signed a Bitcoin mining incentive bill into law which offers preferential energy tariffs to mining firms in the hope of drawing them to the state.
Attracting Bitcoin enthusiasts
It is estimated that in excess of 100 million individuals now own Bitcoin, and a substantial number of these hold a great deal of currency, making them a wealthy community. As a collective, many Bitcoin enthusiasts are drawn by ideas of freedom from government intervention, liberty and decentralized ideals.
That many Texans share these ideals means that the state declaring itself Bitcoin friendly could be seen as a great reason for some of the wealthy owners of Bitcoin to seek to live in the state. Bringing this wealth to the state would of course offer a great deal of potential benefit too.
The wider-effects of Governor Abbott's announcement are yet to emerge, but it seems likely to be a great move with a lot of potential benefits for the state and its residents.