Tennessee lawmakers are contemplating laws that will enable the state to carry bitcoin as a part of its public monetary reserves.
If handed, the measure would place Tennessee amongst a small group of U.S. states which have moved to formalize bitcoin holdings by statute.
Home Invoice 1695, referred to as the Tennessee Strategic Bitcoin Reserve Act, was filed earlier this month by Rep. Jody Barrett (R–Dickson). The invoice is scheduled for consideration in the course of the present session of the 114th Tennessee Common Meeting.
It might grant the State Treasurer authority to speculate a restricted share of choose state funds in bitcoin.
The invoice’s findings cite inflation as a central concern. Lawmakers state within the invoice that rising costs erode the actual buying energy of belongings held within the basic fund, the income fluctuation reserve, and different state pools.
Bitcoin is described within the laws as a decentralized digital commodity with a set provide and world liquidity. The invoice argues {that a} fiduciary investor could use such an asset to enhance long-term, inflation-adjusted returns.
“That is about accountable stewardship of public funds,” Barrett mentioned in a press release. He in contrast bitcoin to gold and framed it as a hedge towards inflation.
Tennessee follows a rising wave of U.S. states exploring Bitcoin-focused coverage, with lawmakers in South Dakota and Kansas introducing payments that will enable public funds to be allotted to bitcoin or positioned right into a strategic Bitcoin and digital belongings reserve.
On the similar time, states like Rhode Island and Florida have revived or reintroduced laws geared toward finding out Bitcoin, easing its use, or doubtlessly including it to state steadiness sheets below outlined oversight frameworks.
10% of Tennessee’s basic fund into bitcoin
Beneath the proposal, the Treasurer may allocate funds from the overall fund, the income fluctuation reserve, or different state funds authorized by lawmakers. Bitcoin publicity could be capped at 10% of every eligible fund on the time of buy.
Annual purchases could be restricted to five% per fiscal 12 months till the cap is reached. The invoice permits passive worth positive factors to push holdings above the cap with out forcing gross sales.
The laws restricts investments to bitcoin solely. It bars allocations to different cryptocurrencies or digital belongings. Bitcoin could possibly be held straight by the state, by a certified custodian, or by way of an exchange-traded product tied solely to bitcoin.
All types of publicity would depend towards the identical cap.
The invoice units detailed custody requirements. A “safe custody answer” should retailer non-public keys in encrypted {hardware} saved offline in not less than two areas. Entry would require encrypted channels and multi-party authorization.
Audit logs could be necessary. Custody techniques would face annual third-party code evaluations and penetration checks. Suppliers would wish catastrophe restoration plans.
Constant transparency checks
Transparency is a core function of the proposal. Each two years, the Treasurer would wish to publish a public report. The report would record the quantity of bitcoin held, its greenback worth at buy and on the finish of the interval, and a abstract of transactions.
It might additionally embody a cryptographic proof that permits third events to confirm on-chain balances. Safety evaluation summaries could be accessible upon request.
The invoice additionally permits the Treasurer to create a program to simply accept bitcoin for taxes, charges, or different state obligations. Participation could be voluntary. Any bitcoin obtained could be transferred to the overall fund and recorded at market worth. Businesses could be reimbursed in {dollars}.
Supporters say the construction displays Tennessee’s broader strategy to asset administration. The state oversees greater than $132 billion in belongings, together with one of many top-rated public pension techniques within the nation.
“Even sturdy steadiness sheets face dangers that conventional belongings don’t hedge,” mentioned David Birnbaum, president of the Tennessee Bitcoin Alliance. He mentioned bitcoin provides diversification as a result of its low correlation with different asset courses.
The invoice directs the Treasurer to publish a bitcoin funding coverage by January 1, 2027. A full efficiency and danger evaluate could be due by October 1, 2032.
Lawmakers would then determine whether or not to proceed, revise, or repeal this system.
If authorized, the act would take impact on July 1, 2026.
