Texas crypto fund was a mistake
Crypto is going down, and so is the Texas crypto fund.
We had strong reservations about the Texas Strategic Bitcoin Reserve, signed into law last year, and it’s taken but a few months for the market to confirm our misgivings.
Cryptocurrencies have been in a nosedive since the fall. In February, Bitcoin lost roughly 45% of its all-time high peak value of $126,000, falling to a low under $64,000. It has slightly recovered since, but digital currency looks less appealing by the minute.
Our main concern is the use of taxpayer dollars on a high-risk and shadowy currency. For one, bitcoin and other cryptocurrencies are extremely volatile. Proponents of the bitcoin reserve might argue that investment portfolios often include a mix of low-risk investments with small returns and high-risk bets that promise bigger gains. Perhaps bitcoin will rebound, putting the Texas reserve back in the black.
But bitcoin’s volatility is only part of the problem here.
Crypto’s anonymity and decentralized nature have been exploited by bad actors, from scammers to Mexican drug cartels. These currencies have been used for money laundering, ransomware and other illicit activities.
And there is also the environmental cost. Cryptocurrency mining needs vast amounts of water and electricity, raising concerns about resource allocation in communities in Texas and across the country.
Back in December, acting state Comptroller Kelly Hancock wrote that the goal to implement the crypto fund was to “build a secure reserve that strengthens the state’s balance sheet.”
That’s not what’s happening. We are now in the red.
The state invested $10 million in this crypto reserve, and now its value has fallen to about $7.5 million. Granted, it is a relatively small amount relative to Texas’ budget, but it should give state officials serious pause about investing more taxpayer money in bitcoin.
The sponsor of the bill that created the reserve, state Rep. Giovanni Capriglione, R-Southlake, told this newspaper in a statement that the goal of the reserve wasn’t to secure short-term gains but to diversify the state’s portfolio and hedge against inflation.
Investing in bitcoin, given all its baggage, isn’t fiscally responsible.
And we’re not holding our breath that Congress is going to straighten things out. Recent efforts in Washington, D.C., to pass a regulatory framework for cryptocurrencies have hit an impasse, according to news reports.
Texas leaders jumped too eagerly onto the crypto train. We wish they hadn’t.
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