Texas Lawmakers Shake Up Crypto World with Gold-Backed Proposal

Key Points:

• Two Texas lawmakers propose a gold-backed state digital currency.
• Bills state that a fractional equivalent amount of physical gold would back the proposed digital currency.
• Although neither of the bills has been passed or presented for a vote, both state that this act will take “effect September 1, 2023.”

Two Texas lawmakers, Senator Bryan Hughes and Representative Mark Dorazio, have introduced identical bills to create a state-based digital currency, backed by gold.

This move comes amidst several United States lawmakers’ objections to introducing a central bank digital currency (CBDC). According to the bills, the proposed digital currency would represent a fraction of a troy ounce of gold held in trust. Once a person purchases a certain amount of digital currency, the comptroller would use the money received to buy an equivalent amount of gold. The purchaser would receive digital currency equal to the amount of gold that the comptroller purchases with the money received.

It is important to note that the value of a unit of digital currency must be equal to the value of the appropriate fraction of a troy ounce of gold at the time of the transaction. Additionally, the trustee must 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. A fee might be established “at any rate necessary” to cover the costs of administering this chapter.

Although neither of the bills has been passed or presented for a vote, both state that this act will take “effect September 1, 2023.” This is a significant development in the digital currency space, as several United States lawmakers have recently argued against the U.S. introducing a CBDC. Florida Governor Ron DeSantis stated in a March 20 press conference that CBDCs would grant “more power” to the government, adding that it provides the government “with a direct view of all consumer activities.” Meanwhile, on March 21, Republican Senator Ted Cruz introduced a bill to block the Fed from launching a “direct-to-consumer” CBDC, stating that it’s “more important than ever” to ensure U.S. policy on digital currencies protects “financial privacy, maintains the dollar’s dominance, and cultivates innovation.”

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