Earlier this month, the Texas Department of Banking began to permit banks to hold cryptocurrency, a crucial step toward engaging the state in the investment possibilities of the virtual and often viral blockchain.
This is welcome news to investors and follows the Texas Legislature’s passage — and Gov. Greg Abbott’s signing — of the “Virtual Currency Bill” that gave Bitcoin, Ethereum and other cryptos legal status within the state’s commercial code. This added layer of legitimacy and regulation can help attract investors to Texas in the untamed and still largely unregulated market of cryptocurrency.
The law, introduced by state Rep. Tan Parker, R-Flower Mound, got overwhelming bipartisan support. And Abbott expressed his support for it, saying that blockchain currencies are “a booming industry that Texas needs to be involved in.”
To be clear, Texas already is involved in the industry, and in a big way. Cryptocurrency miners often use vast amounts of energy to power computers hunting the web for Bitcoin or other currency. Texas has a lot of energy, and in West Texas, it has a lot of solar and wind energy, which takes some of the sting out of the environmental criticism that cryptocurrency faces. Bitcoin miners alone use a whopping 4.77 gigawatts per year — enough to power 524,700,000 LEDs — and Cambridge University projects that we could see the industry more than double that to 11.49 gigawatts annually. There are large mining facilities operating in Rockdale, a town of 6,000 in Central Texas. Meanwhile, large crypto firms continue to eye West Texas as a place to invest. Texas needs to encourage this kind of investment, but with necessary regulatory care, especially with such lofty goals as taking Wyoming off of its pedestal as the country’s leader in the industry.
But as Texas gets into the blockchain business more fully, there are three things we hope will happen: the industry will see Texas as a worthy place of investment; the industry will check its well-earned reputation as a safe haven for criminal funds as private investors crowd them out; and that the Texas Legislature will help generate legal solutions that address the value cryptocurrencies represent to lawbreakers.
While heavy-handed regulations can kill an industry, basic oversight of Bitcoin and other cryptocurrency transactions may help prevent online criminal activity based in the state. We encourage banks to enforce procedures that maintain the ethical acquisition of cryptocurrency by its members.
These currencies appear ever more likely to become a permanent part of the way business is done, whether we like it or not. Texas is wise to take steps to ensure the state is prepared. But there remains a long way to go to ensure that we both realize the value of the blockchain and create laws and regulations that ensure it is not a refuge for ill-gotten gains.