(Kitco News) – Bitcoin‘s stature has been raised in Texas as updated state law comes into effect acknowledging cryptocurrencies in its commercial code.
House Bill 4474 received the regulatory nod from state legislatures in May. It was signed into law by Governor Gregg Abbott the following month. However, it didn’t take effect until Sept 1, alongside HB 1576, to create a blockchain workgroup in Texas.
HB 4474, in particular, is being compared to Wyoming’s Digital Asset Bill, which was passed back in 2019 thanks largely to the efforts of Caitlin Long. She is an industry advocate and CEO of Cheyenne, Wyo.-based digital asset bank Avanti Bank. Long explained to Kitco the significance of HB 4474 in Texas, saying,
“Texas became the fourth U.S. state, behind Wyoming, Rhode Island, and Nebraska, to clarify the commercial law status of these assets. This is critical because it means crypto is backwards-compatible with the legal system in those states. That’s important because it means parties to transactions have clarity regarding their legal rights and obligations, judges have a roadmap to adjudicate disputes, and lenders know they have an enforceable lien on the crypto pledged as collateral for collateralized loans.”
Christopher Calicott, managing director at Trammell Venture Partners, broke HB 4474 down further. He explained how the law provides clarity for institutions wanting to participate in the state’s “Bitcoin-backed credit market security arrangements.”
For example, up until now, Texas’ Uniform Commercial Code (UCC) didn’t address Bitcoin’s features, which served as a stumbling block for large institutions wanting to participate in Bitcoin-backed credit arrangements. By their very nature, big investors need to know how edge-case events will be treated. The old language in the UCC provided nothing in the way of assurances.
Most of the cryptocurrency credit arrangements that exist involve Bitcoin. With the implementation of HB 4474, there is “additional certainty about control of the asset through a majority of private keys,” Calicott told Kitco. He pointed to Bitcoin as a roughly $1 trillion asset, explaining,
“Most other assets would have even more dollar equivalent in terms of credit and/or derivatives of the base asset like Bitcoin—perhaps even multiples. That’s currently not the case in Bitcoin-backed credit arrangements, and one key factor is the current lack of UCC clarity.” HB 4474 changes that, the result of which is likely institutional investors coming off the sidelines and into the Bitcoin market.
“Going forward, I would expect larger participation by family offices, plus banks and other traditional institution types who want to access these growing markets but whose mandates do not allow them to do so. This clarity with HB4474, of course, is currently limited to Texas (and perhaps one or two other states), but we hope that with Texas being the ninth largest economy on earth, Texas’ leadership here will prompt others to follow suit,” said Calicott.
The Bitcoin price is currently hovering above $51,000. According to market bulls, it is only a matter of time before Bitcoin crosses its all-time high of almost $65,000 reached in April.
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