Texas Legislature Passes Bill to Hold Bitcoin as Treasury Reserve

Legislative Background

In a landmark 85–62 vote on May 21, 2025, the Texas Senate approved House Bill 2412, authorizing the state comptroller’s office to hold up to 5% of the state’s $130 billion rainy-day fund in Bitcoin. The legislation, sponsored by Representative Laura Thompson, passed after months of debate over volatility, custodial safeguards, and the message it sends to other states.

Texas has long been a crypto-friendly jurisdiction, home to approximately 25% of U.S. Bitcoin mining capacity thanks to abundant renewable energy and favorable power pricing. In 2024, the state reported $3 billion in crypto-related economic activity and added over 4,500 blockchain jobs, according to the Texas Blockchain Council.

Proponents argue the bill cements Texas’s leadership in digital finance innovation. “We want to diversify our reserves beyond traditional assets,” said Comptroller Rafael Mendoza. “Bitcoin offers a hedge against dollar devaluation and global monetary uncertainty.” Opponents warned of untested fiscal risks and urged strict custody protocols.

Key Bill Provisions

HB 2412 outlines multiple guardrails:

• Allocation Cap: Up to 5% of the Economic Stabilization Fund—roughly $6.5 billion—can be allocated to Bitcoin holdings.
• Custody Requirements: Assets must be held with federally insured custodians or through state-approved multi-signature cold storage solutions.
• Valuation & Reporting: Monthly mark-to-market reports to the State Legislature’s budget committee, plus stress-testing under a 30% price correction scenario.
• Risk Oversight: A new crypto advisory council, composed of state treasury officials, academic economists, and industry experts, will review strategy quarterly.

The state may liquidate holdings if Bitcoin drops more than 40% from the acquisition price within a 90-day window, protecting taxpayers from runaway losses. Deposits and withdrawals will be coordinated via the Texas Treasury Safekeeping System, which currently manages over $300 million in state assets.

Industry & Political Reactions

Wall Street responded with cautious enthusiasm. Morgan Stanley analyst Jason Lau upgraded his Crypto Adoption Outlook to “Moderate,” citing Texas’s move as a potential inflection point for institutional acceptance. “If other states follow, ETFs and pension funds may feel emboldened to increase allocation,” Lau wrote in a research note.

Nationally, Democratic lawmakers criticized the bill. Senator Maria Castillo remarked, “This is a speculative gamble with taxpayer dollars.” She introduced a companion bill in the U.S. Senate to mandate federal reviews before any state holds digital assets. Meanwhile, Republican governors in Florida and Ohio praised Texas’s leadership, hinting at similar proposals in their legislatures.

Crypto firms lauded the move. Coinbase CEO Brian Armstrong tweeted, “Texas showing the world that states can responsibly integrate digital assets into public finance.” The Texas Blockchain Council pledged to assist with technical implementation and public education campaigns.

Financial Impact Analysis

Allocating 5% to Bitcoin could boost the fund’s annualized return by an estimated 3 percentage points, based on a 24-month backtest of BTC performance versus U.S. Treasuries. Given the fund’s average yield of 2.1%, this suggests a potential uplift to 5.1% over time, though with elevated volatility.

Stress-test modeling from the Texas Comptroller’s office shows that even a 50% drawdown in BTC—similar to the 2021 crash—would reduce the fund’s value by just 2.5%, a manageable hit within the legislature’s risk tolerance framework.

However, critics highlight liquidity concerns. Converting multi-billion-dollar Bitcoin positions without market impact could be challenging; OTC desks and custodial partners will need to coordinate large block trades. The advisory council is exploring partnerships with major custodians like Fidelity and BitGo to mitigate slippage.

Looking Ahead

HB 2412 takes effect July 1, 2025, giving the comptroller until December 2025 to submit a detailed implementation plan. The first purchases could land on balance sheets by Q1 2026. Should Bitcoin rally past $150K by then, Texas stands to record headline-making gains.

Other states are watching closely. If Texas’s experiment succeeds, we may witness a wave of digital-asset allocations across state funds—potentially reshaping public-asset management nationwide. Yet, the ultimate verdict will hinge on execution, custody integrity, and the crypto markets’ next cycle.