Tennessee lawmakers are considering legislation allowing the state to use bitcoins as part its public reserves.
Tennessee would join a select group of U.S. state that formalizes bitcoin through statutory means if the bill is passed.
House Bill 1695 (also known as House Bill 1695) is the Tennessee Strategic Bitcoin Reserve ActWas filed earlier this month by Rep. Jody Barrett (R–Dickson). This bill will be considered during the current session (114th Tennessee General Assembly).
This would give the State Treasurer power to invest limited funds of state in bitcoin.
Inflation is a major concern in the bill. The bill states that the rising price of goods and services erodes the value of the assets stored in the General Fund, Revenue fluctuation Reserve, etc. state pools.
In the bill, Bitcoin is defined as a global digital currency with a finite supply. According to the bill, a fiduciary can use a digital asset like bitcoins in order to increase long-term returns that are inflation adjusted.
“This is about responsible stewardship of public finances,” Barrett made a public statement. He said bitcoin was like gold and that it could be used as a hedge to inflation.
Tennessee is the latest state to explore a Bitcoin-focused law. lawmakers in South Dakota Kansas introducing Bills that allow for public funds to either be allocated towards bitcoin or to a reserve of digital assets and Bitcoin.
States like Rhode Island and Florida have revived Or reintroduced laws aimed at studying Bitcoins, ease its use or adding them to the state’s balance sheet under specified oversight frameworks.
Tennessee General Fund: 10% into Bitcoin
The Treasurer would be able to allocate funds either from the state general fund, reserve for revenue fluctuation, or approved funds by the lawmakers. The maximum Bitcoin exposure at purchase would be 10%.
Purchases would be restricted to no more than 5% each fiscal year, until the limit is reached. This bill permits passive gains in price to increase holdings beyond the cap, without forcing any sales.
This legislation only allows investments in bitcoin. This legislation bars all allocations of funds to digital assets and other crypto-currencies. It could be directly held by the government, through a certified custodian or an exchange-traded products tied to Bitcoin.
Each exposure type would be subject to the same ceiling.
This bill contains detailed standards for custody. The bill sets detailed custody standards. “secure custody solution” Private keys must be stored in offline encrypted hardware at two separate locations. Access would require encryption channels and multiparty authorization.
The audit log would become mandatory. Annual code review and penetration testing by third parties would be required for custody systems. Disaster recovery plans would be required by providers.
Transparency checks that are consistent
The proposal is built around transparency. A public report would be required by the Treasurer every two years. This report lists the dollar amount at which bitcoin was purchased and the value of that currency at the end.
The proof would include a cryptographic code that would allow third parties to check the balances on chain. Summaries of the security assessments would be provided upon request.
It also gives the Treasurer authority to develop a bitcoin-accepting program for payments of taxes, charges, and other obligations. Participants would have a choice. Bitcoins received will be recorded and transferred at the market price to the general funds. The agencies would receive reimbursement in US dollars.
Some supporters say that the new structure is a reflection of Tennessee’s overall approach to asset-management. State assets total more than $132 Billion, which includes one of the best-rated pensions in the nation.
“Even strong balance sheets face risks that traditional assets do not hedge,” David Birnbaum is the president of Tennessee Bitcoin Alliance. David Birnbaum, president of the Tennessee Bitcoin Alliance, said that bitcoin is a diversifier due to its low relationship with other asset classes.
The bill requires the Treasurer publish an investment policy for bitcoin by January 1, 2020. By October 1, 2032, a full review of performance and risks would be required.
The program would be reviewed by the lawmakers and they could decide to repeal, change or continue it.
Upon approval, this act would come into effect on 1st July 2026.
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Source: bitcoinmagazine.com
