Texas Lawmakers Introduce Bill Creating A State-Based Digital Currency Backed By Gold

Updated: 09 April 2023

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The Texas House and Senate have proposed identical bills for creating a state-based digital currency backed by gold. However, this move comes as U.S. lawmakers introduce bills pushing back against creating a US Dollar-based central bank digital currency (CBDC).

Texas Senator Bryan Hughes and State Representative Mark Dorazio proposed bills for a state-based digital currency, despite several US lawmakers objecting against CBDCs in recent times. https://t.co/klM9USNJ2K

— Cointelegraph (@Cointelegraph) April 9, 2023

On March 10, Senator Bryan Hughes introduced Bill 2334, and Representative Mark Dorazio introduced House Bill 4903 that day. The lawmakers want the state comptroller to establish a digital currency fully backed by gold and fully redeemable in cash or gold. The bills noted:

The comptroller shall establish a digital currency backed by gold so that each unit of the digital currency issued represents a particular fraction of a troy ounce of gold held in trust. If need be, a private vendor can be enlisted to help establish the digital currency.

Notably, the comptroller would be required to create a mechanism that would allow the new gold-backed digital currency to be used by individuals in their daily transactions. Further, the bills noted:

In establishing the digital currency, the comptroller shall establish a way to enable a person holding the digital currency may readily transfer the digital currency to any individual via electronic means.

The gold-backing process

Additionally, the bill narrates that once a person purchases a particular amount of digital currency, the comptroller would use the received amount to buy an equivalent amount of gold. Later, the purchaser would receive digital currency that equates the amount of gold that the comptroller buys with the money received from the purchaser. However, the value of a unit must equalize the value of the appropriate fraction of a troy ounce of gold during the transaction period.

However, the Texas Council would hold gold backing the currency in trust on behalf of the holders. The bill has further asserted:

The trustee shall maintain enough gold to provide for the redemption in gold of all units of the digital currency that have been issued and are not yet redeemed for money or gold.

Noteworthy, a fee may be “established at any rate necessary” to cover the costs of this sector. All the bills are yet to be passed or presented for a vote. However, the bill states that “this act will be effective on September 1, 2023.”

The Central Bank Digital Currency (CBDC)

Recently, several lawmakers in the United States have argued against introducing CBDC. Digital currencies always exist as virtual coins on smartphones or computers. The main difference between a CBDC and peer-to-peer electronic cash, including Bitcoin or ETH, is that the value of a CBDC is backed and controlled by the government. In return, the gold-backed digital currencies would create an alternative and enable users and other individuals to do away with the CBDC.

The environmental lawyer and anti-vaccine activist Robert F. Kennedy Jr took to his Twitter to note his perception of CBDC. In his tweet, he noted his perceived risks of CBDCs, saying:

The Fed announced it will introduce its “FedNow” CBDC in July. CBDCs grease the slippery slope to financial slavery and political tyranny.

Apart from Kennedy, the Republican Governor of Florida, Ron DeSantis, at a March 20 conference, noted that:

A CBDC enables the government with a direct view of all customer activities. They can get into society and exercise their agenda, and they will do it. So, what the CBDC is all about is surveilling Americans and controlling the behavior of Americans.

In February, Tom Emmer, the Republican Representative, presented the CBDC Anti-Surveillance State Act to Congress. Emmer stipulated that this was an effort to protect Americans’ right to financial privacy. Notably, the bill could stop the Fed from issuing the digital dollar to anyone and bar the central bank from enacting monetary policy based on a CBDC. Nonetheless, Senator Ted Cruz proposed a bill to block the development of a retail CBDC.

In a statement, Cruz noted:

It’s more crucial to ensure U.S. policy on digital currencies protects financial privacy, maintains the dollar’s dominance, and cultivates innovation.

Further, Cruz said:

CBDCs that fail to comply with the three basic principles could facilitate a platform such as the Federal Reserve to mobilize itself into a retail bank, collect personally identifiable data on users, and track their information.

The Digital currency impact

The Texas lawmaker’s introduction of a state-issued gold-backed digital currency would lead to competition with the Federal Reserve notes and the Fed’s monopoly on money.

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