Texas Considering Its Own Gold-Based Digital Currency For Universal Use
✪ Texas could become the first state in the nation to issue its own digital currency based on gold and silver. The Texas Senate could vote on Senate Bill 2334 this week. A similar bill in the Texas House, House Bill 4903, did not advance. If the Texas digital currency proposal becomes law, money could be spent with a debit card by people anywhere in the world, not just within Texas…
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he measure would create an alternative to a federal digital dollar, an idea currently being considered by the federal government because of a directive by President Joe Biden. Some conservatives have said they fear a federal digital dollar could be manipulated by the U.S. government and used to spy on account owners, possibly controlling how and when they can spend their money.
Under the proposed law, the Texas comptroller would create a digital currency based on gold or silver and would be given the authority to mint pure gold or silver coins based on weight.
The coins and the digital currency would be considered legal tender to pay debts and would be “readily transferable … to another person,” according to the bill. Under the plan, the digital money debit card could be used anywhere debit cards are accepted.
There is no provision to eliminate the use of the federal dollar in Texas. The use of the state’s digital currency would be optional and in addition to using U.S. legal tender. The gold and silver would be held at the Texas Bullion Depository. As the value of that gold or silver rises, so does the spending power of the account holder.
Under the proposed bill, people outside of Texas could create accounts and use the system wherever they live in the world as long as it’s legal.
Under the Texas law now under consideration, the Texas comptroller would be required to create a mechanism to use the new gold-or-silver-based digital currency in everyday transactions for goods and services.
The state comptroller, or a trustee hired to oversee the program, would purchase and hold enough gold or silver to cover the units of digital currency set aside for each account holder.
The value of the digital currency account would fluctuate, depending on the current value of gold, which is now hovering around $2,000 per ounce.
So if a user opens an account by purchasing an ounce of gold on a day when gold is valued at $2,000 per ounce, the account value would start at $2,000. As purchases are made, the amount of gold owned by the account holder changes, based on the current value of gold.
If a purchase of $1,000 is made when gold is valued at $2,000 per ounce, the amount of gold held in that user’s name would drop to a half-ounce. The account value also would rise and fall with the changing value of gold.
Users could redeem their digital currency from the state for cash, bullion, or coins of gold or silver, based on the metals’ market rate on the date of redemption.
All the gold and silver purchased would be pooled into a depository account and held at the Texas Bullion Depository (TBD), a state-run agency already in existence where the public can store precious metals in a secure facility vault. It’s located on a 10-acre campus in Leander, just north of the capital city of Austin.
The U.S. Congress has the power to coin money and regulate its value. But states also can make their own gold and silver coins, as authorized by Section 10, Article 1 of the U.S. Constitution.
The Texas bill’s sponsor, Republican Sen. Bryan Hughes, said that inflation, bank failures, and the specter of a Central Bank Digital Currency (CBDC) are financial issues that worry Texans. “We know that the dollar, of course, lost more value last year—in 2022—than any year since 1980,” Hughes said during a hearing on the bill.
The proposed plan for digital currency in Texas based on gold and silver is “a hedge against inflation, a signal to the Feds that their digital dollar will not control us, and another way to pay at a very basic level,” Hughes said.
Kevin Freeman, an investment expert for 40 years who spoke during an April hearing on the bill, said Texas could dominate the digital currency market, if it becomes the first state to create a workable plan.
Freeman, the host of the Economic War Room podcast, said that the Texas plan would operate in a way similar to Glint Pay, a London-based payment platform.
Glint Pay purchases gold and holds it in Switzerland for users. The gold owned by each user is tied to a debit card.
When the debit card is used to make a purchase, Glint converts the money, based on the current value of the gold in the user’s account, into the merchant’s local currency and deducts the total from the user’s account balance. As the value of the held gold fluctuates, so does the value of each user’s account.
The downside to Glint Pay is that people must report and pay taxes on capital gains on gold transactions because those associated with the program are considered private sales of gold, Freeman said.
The Texas bill would allow the state to make its digital currency and coins legal tender, eliminating the need to pay capital gains taxes, he said.
Other states have made silver coins as legal tender, but the coins didn’t function as money that could be used in transactions. “This is the first bill in modern times that addresses all of the issues and problems,” Freeman said.
A release from the White House Office of Science and Technology Policy said that the Biden Administration “has been closely examining the implications of, and options for, issuing a CBDC.”
And that irks Republican Sen. Ted Cruz of Texas, who has proposed legislation to stop that idea in its tracks:
“The federal government has no authority to unilaterally establish a central bank currency. This bill goes a long way in making sure big government doesn’t attempt to centralize or control cryptocurrency and instead, allows it to thrive in the United States. We should be empowering entrepreneurs, enabling innovation, and increasing individual freedom — not stifling it.”
Republican Sen. Chuck Grassley of Iowa agreed, saying:
“The American people ought to be able to spend their money how they choose without the possibility that every transaction could be tracked by the government. Policy this impactful should be made by Congress, not government bureaucrats, and our bill would ensure that no one is snooping on the finances of hardworking Americans. Every American deserves that peace of mind.” ✪
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