According to the Legislative Budget Board (LBB), the fiscal implications of SB 21 are indeterminate because the amount of money that may ultimately be appropriated to the Texas Strategic Bitcoin Reserve, as well as the quantity and market value of qualifying cryptocurrency that may be acquired or donated, cannot be estimated. While the bill establishes the legal framework for the reserve, it does not appropriate funds. Instead, it provides the legal authority for future legislative appropriations and authorizes the reserve to receive dedicated revenues, investment earnings, gifts, grants, donations, and qualifying cryptocurrency.

The bill authorizes the comptroller to invest reserve assets, contract with third-party custodians and liquidity providers, conduct independent audits, use derivatives, participate in staking activities, and manage reserve assets in accordance with prudent investment standards. The LBB assumes that any administrative costs associated with these activities could be paid using proceeds generated by the reserve itself, rather than requiring additional General Revenue appropriations. Because the reserve's size and investment activity are unknown, however, neither administrative costs nor investment returns can be quantified with certainty.

The fiscal note also observes that the bill creates a special fund outside the state treasury, which may affect future legislative oversight because funds held outside the treasury may be expended without legislative appropriation, as permitted under the Texas Constitution. Additionally, the bill creates a dedicated fund or revenue source that would be subject to legislative funds-consolidation review. The LBB concludes that the bill has no anticipated fiscal impact on local governments.

SB 21 presents a novel approach to integrating cryptocurrency into state investments, positioning Texas as a potential leader in digital asset adoption. However, the bill introduces significant financial risks associated with Bitcoin's volatility, regulatory uncertainty, and lack of historical stability compared to traditional state investments. While the bill attempts to diversify the state's portfolio, it also expands government intervention in private markets and could expose taxpayer funds to unpredictable fluctuations. Therefore, amendments are recommended to limit exposure, clarify risk management strategies, and ensure legislative oversight.

While the committee substitute for SB 21 improves oversight, transparency, and investment controls, it does not fully address key concerns related to financial risk, government overreach, and taxpayer exposure. The changes in the substitute version make the bill more structured, but fundamental risks still exist, which is why the recommended amendments remain crucial.

While SB 21 aligns with innovation and financial modernization, it conflicts with limited government and free-market principles. If Texas wants to encourage Bitcoin adoption, it should focus on removing regulatory barriers for private businesses rather than investing taxpayer funds in speculative assets.

As such, Texas Policy Research recommends that lawmakers vote NO on SB 21 unless amended as described. Without these amendments, SB 21 poses significant risks to Texas taxpayers, financial stability,  and free-market principles. If Texas wants to be a leader in Bitcoin adoption, it should focus on deregulating cryptocurrency commerce, not managing speculative state investments.

SB 21 is a named legislative priority of Texas Lt. Gov. Dan Patrick.

•  Cap the percentage of state funds that can be allocated to the Texas Strategic Bitcoin Reserve. This would prevent overexposure of state resources to highly volatile digital assets and ensure that traditional investments (e.g. gold, bonds, and real estate) remain the foundation of Texas' financial resilience.
• Require quarterly public audits instead of biennial reports. Given cryptocurrency's volatility, a biennial report is insufficient. This would ensure continuous legislative oversight to prevent financial mismanagement.
• Prevent risky trading practices and require passive holding only. This would prevent high-risk trading strategies that could lead to massive state losses and encourage conservative, long-term asset management in line with traditional treasury practices.
• Define pre-set conditions for liquidating Bitcoin holdings to minimize taxpayer losses. This would avoid holding Bitcoin or other cryptocurrency at a loss indefinitely and prevent Texas taxpayers from absorbing major losses due to market crashes.
• Prevent any retirement, education, or public service funds from being used for Bitcoin investments. This would protect retirement and essential services from potential high-risk losses and ensure only discretionary state funds are used in Bitcoin investments.
• Require vetting and approval processes for Bitcoin donations to prevent money laundering. This would prevent Texas from becoming a laundering hub for illicit Bitcoin and ensure donations align with federal financial regulations.

• Senate Committee on Business & Commerce: 10Y/0N (1 Absent)
• House Committee on Delivery of Government Efficiency: 8Y/4N (1 Absent)

• Texas Strategic Bitcoin Reserve: What It Is and What It Means for the State