States Are Racing to Throw Taxpayers' Money Into "Strategic Cryptocurrency Reserves"
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State governments are crawling over each other to be the first to dump their taxpayers' money into the blockchain a gamble that, depending on the vagaries of the crypto market and the wiles of hackers, either make them a speculative bundle or plunge them into financial ruin.On Tuesday, the Arizona state Senate Finance Committee passed the "Strategic Bitcoin Reserve Act," also known as SCR1005, up to the Senate Rules Committee for review. This is the last step before it goes to the broader Senate, and then the state House of Representatives.There's a long way to go. But the act, if passed, would allow the state treasurer, State Retirement System, and Public Safety Retirement System to invest up to 10 percent of Arizona's public fund in digital assets.Not to be outdone, a Utah house committee quickly passed its own slew of "Blockchain and Digital Innovation Amendments" the next day. That bill works toward creating "authority for the state treasurer to invest public funds in certain digital assets."That passage came with a favorable recommendation from the Utah Economic Development committee, and would allow the state's treasurer to invest up to 5percent of its public fund in Bitcoin and some "stablecoins."A whole herd of state legislators just behind them. Texas, Wyoming and Florida are all in early stages of planning "Strategic Bitcoin Reserves," while representatives in Pennsylvaniaand New Hampshire have proposed bills allowing state treasurers to invest state funds in digital assets.Still other states are carving out broader provisions for crypto beyond Bitcoin. Massachusetts recently introduced a bill allowing up to 10percent of the state's public funds to be invested in a range of digital assets including crypto and NFTs. They're joined by Oklahoma, which places provisions on stablecoins similar to Utah, and North Dakota, which hasn't defined what it considers a digital asset.But there are many indications that hype, not fiscal responsibility, may be leading the way.Arizona's SCR1005, for example, makes the dubious claim that the "federal government holds approximately 200,000 Bitcoin." That might lead an impressionable and possibly tech illiterate state lawmaker to believe that the US government alsohas a federally approved bitcoin reserve, which is far from the truth.In reality, these "funds" come overwhelmingly from three high-profile DOJ asset seizures. Following these seizures, the DOJ has reportedly transferred over 50,000 Bitcoin to other wallets, which doesn't exactly fit the bill for a "federal Bitcoin reserve." The US Marshals service has auctioned smaller holdings in the past, further showing that these "assets" are meant to be temporary.For his part, our returning president and his grift moguls have made a renewed push for crypto, releasing an executive order clarifying the federal government's definition of phrases like "blockchain" and "Central Bank Digital Currency," and revoking previous measures intended to regulate digital assets.Though Trump's federal reserve hasn't touched the blockchain yet, the mere presence of Bitcoin around any federal agency may be read as a tacit endorsement by investors and government officials alike, according to Gavin Brown, lecturer in financial tech at the University of Liverpool."When they're holding things like Bitcoin, the price is incredibly volatile," Brown told Newsweek. "So they have a lot of, kind of, friction, in the sense that do they hold Bitcoin for the price to go up to speculate... or do they sell it now but potentially miss out on future gains?""By the same token, if you excuse the pun, if [the DOJ] holds Bitcoin to try and get more value for it, the signal that sends to the society and economy at large is that the government's longed Bitcoin, they love it," he added.That volatility is a huge issue. The appeal of crypto, it's long been droned, is its decentralized nature it's an inherently risky venture fraught with rug pulls, shitcoins, and fraud. That might be a massive draw to online criminals and scam artists, but its appeal for state governments, let alone the federal government, is hard to understand.As economists, tech critics, and even crypto bros come out to rail against the idea, it's likely that right-wing lobbying groups are to blame for the push to gamble granny's retirement fund away on shady crypto markets.It's a troubling sign as our elected officials and institutions fall for endless tech bro grafts like when Tennessee lawmakers tried passing legislation allowing state and local leaders to invest tax dollars into NFTs, or more recently, when our sitting president rescinded Biden's $1 trillion transportation infrastructure in exchange for a $500 billion AI mega center.More on crypto: Tesla's $750 Million in Bitcoin Just Vanished From Where It Was Being StoredShare This Article
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