While some US regulators are proposing to launch a Federal Reserve-controlled central bank digital currency (CBDC) that could be as manipulated as the dollar, Texas wants a digital currency exchangeable for physical gold and cash.
Senate Bill 2334introduced by Senator Bryan Hughes, and House Bill 4903introduced by Representative Mark Dorazio, together represent the first proposal for a state currency not backed by the dollar but by gold.
The gold standard… but with a crypto twist
Digital currency represents a fraction of a troy ounce of gold – Republican Senator Bryen Hughes submitted Senate Bill 2334, proposing that the Texas Comptroller create the asset, with its value represented by a fraction of one troy ounce of gold.
“The Controller shall establish a gold-backed digital currency such that each unit of digital currency issued represents a particular fraction of a troy ounce of gold held in trust.”
The controller should also establish a way for holders of digital currency to easily transfer or assign it to others through any payment system.
Additionally, the Controller will act as fiduciary and fiduciary on behalf of digital currency holders, maintaining “sufficient gold to enable redemption of gold for all units of the digital currency that have been issued and not yet redeemed. for silver or gold”.
A gold-pegged stablecoin backed by the Texas government
According to the bill, foreign exchange reserves must be backed 100% by gold. To prevent the manipulation of digital currency liquidity, lawmakers have put in place preventive measures. Although unlimited purchases are allowed, the controller must acquire the same fractional amount in troy ounces of gold to ensure its support and stability, avoiding any possible imbalance in the supply and demand of the digital currency.
“(The Controller should) purchase a fractional number of troy ounces of gold equal to the number of units of the digital currency issued to the buyer, and issue to the buyer a number of units of the digital currency equal to the amount of gold that the controller purchases with the money received from the buyer.
So, when a buyer wishes to sell their coins, the controller or designated entity must have an equal amount of cash on hand to cover the funds.
Additionally, those wishing to exchange their coins for physical gold can do so through any designated agent, receiving the equivalent in small gold coins or large bullion.
“The Controller, or a person with whom the Controller has entered into a contract, or a person serving as a trustee for the purposes of this Chapter, may manage the redemption of digital currency for gold using bullion or coins of the size standard and may pay fractional remainders in cash as needed to facilitate the transaction.
It wouldn’t be the first government-backed digital currency. Although the digital dollar is still a long way off (and its issuance isn’t even a sure thing), Miami and New York have already tested issuing their official tokens.
Things didn’t go very well, but it’s at least a start. Unlike these currencies, which fluctuate in value, each Texas state token would have an equivalent value in gold, similar to what Digix Gold Token and Pax Gold tokens do, for example.
For now, the bills must be approved at the committee hearing before becoming formal law and gaining approval from the state Senate and House. However, these plans show Texas’ interest in returning to the gold standard, which has boosted the US economy and commerce for several years.
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