Bitcoin and cryptocurrency. (Credit: Traxer / Unsplash.com)
The state's leadership considers the investments in cryptocurrency.
With reinvigorated interest in cryptocurrency, Republican House legislators are vying to make Pennsylvania a pioneer of digital investments, a move some skeptics believe would be too great of a risk for the state’s bank accounts.
Rep. Mike Cabell, of Dallas, introduced House Bill 2664 last week, which would make Pennsylvania one of the first states to buy Bitcoin directly. The Strategic Bitcoin Reserve Act would allow the treasurer to invest up to 10% of the general fund, emergency savings account, and state investment fund in cryptocurrency.
According to Cabell, investing in Bitcoin is a way to “hedge against inflation.” The cryptocurrency operates on a decentralized system called blockchain, making its value completely independent of fluctuations in the traditional market.
Though it is currently riding high following Donald Trump’s win with a pro-crypto platform, Bitcoin and other cryptocurrencies have a history of volatility that some investors balk at. Trump himself said he was “not a fan” which he claimed were “based on thin air” in a 2019 tweet before changing his stance.
At the time of publication, a single coin is worth $92,406.06 and has enjoyed a consistent upward trend, but the day-to-day volatility is currently about twice that of gold.
There is precedent for a Bitcoin reserve at the national level. The U.S. government currently owns about 210,000 Bitcoin, which is worth over $19 billion at the time of this writing. It represents about 1% of the total Bitcoin share in the world.
One major distinction between this stash and the investment being proposed in Pennsylvania is that the federal Bitcoin supply was primarily confiscated in the process of prosecuting crime. The Strategic Bitcoin Reserve Act, however, would require the state to use its own funds to purchase the coin, making it vulnerable to heavy losses in the event there’s a downturn in value.
Cryptocurrency enthusiasts are optimistic about the coin’s future prospects under Trump. At the Bitcoin Conference in Nashville in July, the president-elect promised to put his weight behind crypto. His plans include creating a Bitcoin and Crypto Presidential Advisory Council, building a strategic national Bitcoin stockpile around the existing supply, and firing Securities and Exchange Commission, or SEC, Chair Gary Gensler “on day one.”
“I will appoint a new SEC chairman who believes America should build the future, not block the future, which is what they’re doing,” said Trump.
Gensler has been the recipient of much ire from the crypto community following commission lawsuits filed against major crypto exchanges. Under his direction, the commission has maintained the viewpoint that most cryptocurrencies – with the notable exception of Bitcoin itself – are securities, which are strictly regulated.
“We are not afraid to litigate matters, whether against the best-resourced founders, the oldest firms, the newest industries, and yes, the largest crypto exchanges,” said Gensler in a speech last year.
Cabell’s legislation follows a bill proposed in May, House Bill 2481, which would create a framework for using blockchain and digital assets and barring the state from levying additional taxes on transactions conducted with crypto.
Satoshi Action Fund, a lobbying group, has been working with legislators across the country to push Bitcoin-friendly agendas at the state level. The group expects Cabell’s legislation to be mirrored in several other states in the coming months. They emphasize the economic and environmental impact of Bitcoin mining.
Historically, the heavy energy use required for the computer systems used to mine Bitcoin, along with their production of electronic waste, has made it an environmentally costly currency, raising red flags and even leading to mining bans from state and national governments.
According to Satoshi, Bitcoin's decentralized nature allows mining operations to be set up anywhere, including locations where miners can capture methane gas to power their work. Advocates see this as an opportunity to partially address emissions from agriculture and the 300,000-700,000 orphan wells across the western half of the state.
