In a move that could potentially set a precedent for other states, Pennsylvania lawmakers have introduced legislation that would allow the state’s treasury to hold up to 10% of its balance sheet in Bitcoin (BTC). The proposal, which was submitted by Representative Mike Cabell on November 12, aims to provide a hedge against inflation and economic uncertainty.
A Tool Against Inflation
According to the memo submitted by Representative Cabell, the bill is intended to offer stability in uncertain economic times. By investing in Bitcoin, the state’s treasurer would be able to shield its portfolios from economic volatility. Cabell cited investment firms like BlackRock and Fidelity, which have already begun incorporating BTC into their portfolios.
Legislative Framework
The Strategic Bitcoin Reserve bill (HB 2664) proposes that up to 10% of the State General Fund, Rainy Day Fund, and State Investment Fund can be invested in Bitcoin. As of November, the state’s Treasury reported having over $9.7 billion in its General Fund and roughly $7 billion in its Rainy Day Fund.
Citing Precedents
Representative Cabell has drawn inspiration from investment firms that have already begun incorporating BTC into their portfolios. The bill appears to be modeled after a framework proposed by the Satoshi Action Fund, a Bitcoin advocacy group. Co-sponsor Aaron Kaufer is uncertain whether the legislation has enough votes to pass.
Other State-Level Initiatives
Pennsylvania’s Strategic Bitcoin Reserve bill is not an isolated effort. In October, the Pennsylvania House passed legislation (HB 2481) to establish a regulatory framework for protecting self-custody and crypto payments. The Satoshi Action Fund authored this "Bitcoin rights" bill.
National Pushes for Bitcoin Adoption
This state-level initiative builds upon promises made by Republican lawmakers in the US government. After the results of the US election were announced, Senator Cynthia Lummis stated her intention to have lawmakers pass a bill to build a strategic Bitcoin reserve. Republicans will hold majority control of the Senate starting in 2025.
Government Adoption of Bitcoin
While some countries like El Salvador and Bhutan already have Bitcoin on their government’s balance sheets, there is no clear indication that President-elect Donald Trump would establish a national BTC reserve while in office. Galaxy Digital founder Mike Novogratz speculated about this possibility earlier in the year.
Fighting Inflation with Bitcoin
Inflation remains a pressing concern for many countries around the world. With interest rates rising and economic uncertainty on the horizon, lawmakers are beginning to explore alternative solutions to traditional fiat currencies.
By investing in Bitcoin, states like Pennsylvania may be able to provide a hedge against inflation and economic uncertainty. The strategic reserve would allow them to shield their portfolios from economic volatility, thereby ensuring stability during uncertain times.
Regulatory Frameworks
While the Strategic Bitcoin Reserve bill proposes to permit up to 10% of state funds to be invested in BTC, it is unclear whether this will set a precedent for other states to follow suit. Pennsylvania’s efforts to establish regulatory frameworks for protecting self-custody and crypto payments demonstrate a willingness to engage with the rapidly evolving digital currency landscape.
National Implications
The push for government adoption of Bitcoin at both state and national levels raises questions about its long-term implications. If successful, this could potentially set the stage for widespread government acceptance and investment in BTC.
