VeChain’s Johnny Garcia Explains Why Texas Could Adopt a Bitcoin Reserve

• Garcia believes that Texas is well-positioned to adopt a Bitcoin reserve due to its pro-innovation leadership
• Last week, the state’s House of Representatives passed Senate Bill 21 (SB 21) with a 101-42 vote
• Texas Governor Greg Abbott still needs to sign the bill, but he has already advocated for Texas to become a hub for blockchain and cryptocurrency innovation

Johnny Garcia, Managing Director of Institutional Growth and Capital Markets at the VeChain Foundation, thinks Texas will probably be the next state to establish a strategic Bitcoin reserve, following New Hampshire’s lead.

Garcia believes that Texas is well-positioned to adopt a Bitcoin reserve due to its pro-innovation leadership. He notes that if that happens, it would normalize digital assets as a strategic asset class, likely encouraging more institutional and enterprise participation. 

Eventually, this could lead to clearer regulations and the development of infrastructure like regulated custody and on-chain auditability.

Speaking of Texas, last week, the state’s House of Representatives passed Senate Bill 21 (SB 21) with a 101-42 vote. It authorizes the state comptroller to invest in digital assets with a market capitalization exceeding $500 billion over the previous 12 months. So far, only Bitcoin meets this criterion. 

The reserve would be managed outside the state treasury, with biennial financial reports mandated for the sake of transparency.

It’s yet to become official as Texas Governor Greg Abbott needs to sign the bill, but considering his previous statements where he advocated for Texas to become a hub for blockchain and cryptocurrency innovation, it’s very likely he will do so soon.

The already mentioned New Hampshire recently enacted a similar law, allowing up to 5% of state funds to be allocated to Bitcoin. 

Then, Arizona did much the same by passing HB 2749 legislation to manage unclaimed digital assets. More precisely, this bill allows the state to claim abandoned digital assets if the owner doesn’t respond within three years.

Once controlled by the state, custodians can stake this crypto to earn rewards or receive airdrops, and any resulting earnings will then be deposited into a new Bitcoin and Digital Asset Reserve Fund for state management.

Institutional acceptance

The establishment of state-level Bitcoin reserves or similar legislation seems to point to a growing institutional acceptance of digital assets, especially in the US. 

For Garcia, these turn of events can signify a fundamental shift in how public finance perceives blockchain assets, as it’s now more probable that they see them as tools for innovation and resilience.

However, he also cautioned against major price drops, since any substantial price declines might lead to state reserve losses. Therefore, an overly large or poorly managed allocation could jeopardize financial stability.

In the end, Garcia’s belief is that a well-defined regulatory framework for cryptocurrencies and a plan to integrate Bitcoin into a strategic reserve will eventually be enacted into law.