South Carolina considers Bitcoin reserve to protect state assets from inflation

South Carolina has become the latest state in the US to introduce a bill to create a strategic Digital Assets Reserve. In a bill sponsored by Rep. Jordan Pace, the State Treasurer can invest up to 10% of its portfolio into BTC.

According to the Bill , officially known as H4256, inflation and economic uncertainties have affected the purchasing power of state-managed assets and pension funds. Thus, there is a need to invest in Bitcoin and other digital assets to hedge against inflation and volatility.

South Carolina Bill to create a digital assets reserve (Source: Bitcoin Laws)

It said:

“Inflation has eroded the purchasing power of assets held in state funds managed by the State Treasurer, as well as state retirement funds.”

The Bill noted that South Carolina does not influence national economic policies. Therefore, the state must find its own way to protect its financial resources, and digital assets are one of those ways. Although it only named Bitcoin, it added that there are other digital assets, and they can also diversify the portfolio.

It added:

“Bitcoin, as a decentralized digital asset, and other digital assets offer unique properties that can act as a hedge against inflation and economic volatility. It also helps to diversify the state’s funds.”

Interestingly, the Bill noted that creating a digital asset reserve is not just for the state to buy digital assets. It added that residents could also donate assets to the reserve. The Bill has now been referred to the Committee on Ways and Means for deliberations.

State Treasurer to be responsible for Digital Assets Reserves

Meanwhile, the state treasurer will manage the reserve. According to the proposed legislation, the treasurer can buy cryptocurrencies using any unused money in State funds, including the General fund, Budget Stabilization Reserve fund, and any other investment fund he manages.

There is no specification on how much to invest, but the Bill stipulates it cannot be more than 10% of the state’s total portfolio. Each digital asset in the reserve must also not be more than 3% of all digital assets in the portfolio at any time.

Interestingly, there is an emphasis on the secure custody of digital assets. The Bill mandates the treasurer to develop policies and protocols for securing digital assets while prohibiting any effort to undermine or disrupt the security or operation of the digital asset network. It also requires the treasurer to hold the asset directly through a state custodian or in the form of an exchange-traded product.

More states make progress on digital assets reserve bills

With South Carolina’s move, it joins the constantly growing list of states with legislative efforts to invest in Bitcoin and other cryptocurrencies. Its neighboring North Carolina currently has four bills seeking to invest in Bitcoin, the latest of which was filed on March 26 in the Senate.

Several states , including Oklahoma, Arizona, Texas, and Utah, have also passed the Bitcoin Reserve bills in one chamber of their legislature, while others, including New Hampshire and Missouri, have also discussed them in public hearings.

So far, interest in Bitcoin bills has been nationwide. According to Bitcoin Laws , 35 states have bills on Bitcoin-related matters and nine active Federal bills on the issue.

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