Pennsylvania Republicans Propose Investing State Funds in Bitcoin

With reinvigorated interest in cryptocurrency, Republican House legislators are vying to make Pennsylvania a pioneer of digital investments, a move some skeptics believe would be too great of a risk for the state's bank accounts.

HARRISBURG — Amid renewed interest in cryptocurrency, Republican state House lawmakers are vying to make Pennsylvania a pioneer of digital investments — a move some skeptics say would be too risky for state coffers.

Rep. Mike Cabell, R-Dallas, introduced legislation last week that would make Pennsylvania one of the first states to buy Bitcoin directly. The Strategic Bitcoin Reserve Act would allow the state treasurer to invest up to 10% of the general fund, emergency savings account and state investment fund in the cryptocurrency.

Cabell has said investing in Bitcoin is a way to “hedge against inflation.” The cryptocurrency operates on a decentralized system called blockchain, making its value independent of fluctuations in the traditional market.

But while Bitcoin is riding high after being championed by Donald Trump on his pro-crypto platform, it and other cryptocurrencies have a history of volatility that some investors balk at. Trump himself said he was “not a fan” of cryptocurrencies, which he claimed were “based on thin air” in a 2019 tweet, before changing his tune.

At the time of this story, a single coin was valued at $92,406.06, and it has enjoyed a consistent upward trend, though day-to-day volatility is about double that of gold.

There is already precedent for a Bitcoin reserve at the federal level. The U.S. government currently owns an estimated 210,000 Bitcoin, which is valued at over $19 billion at the time of this story. It amounts to about 1% of the total Bitcoin share in the world.

One major distinction between this stash and the investment being proposed in Pennsylvania is that the federal Bitcoin supply was largely confiscated in the process of prosecuting crime. The Strategic Bitcoin Reserve Act, however, would require the state to use its own funds to purchase the coin, leaving it vulnerable to steep losses in the event there's a downturn in its value.

Cryptocurrency enthusiasts are optimistic about the coin's future prospects under Trump. At the Bitcoin Conference in Nashville in July, the president-elect promised to put his weight behind crypto. His plans include creating a Bitcoin and Crypto Presidential Advisory Council, building a strategic national Bitcoin stockpile around the existing supply and firing Securities and Exchange Commission Chair Gary Gensler “on day one.”

“I will appoint a new SEC chairman who believes America should build the future, not block the future, which is what they're doing,” Trump said.

Gensler has drawn the ire of the crypto community following commission lawsuits filed against major crypto exchanges. Under Gensler, the commission has maintained the stance that most cryptocurrencies — with the notable exception of Bitcoin itself — are securities, which are strictly regulated.

“We are not afraid to litigate matters, whether against the best-resourced founders, the oldest firms, the newest industries, and yes, the largest crypto exchanges,” Gensler said in a speech last year.

Cabell's legislation follows a bill that was introduced in May, House Bill 2481, which would create a framework for using blockchain and digital assets and bar the state from levying additional taxes on transactions conducted with crypto.

A lobbying group called the Satoshi Action Fund has been working with lawmakers across the country to push Bitcoin-friendly agendas at the state level. The group expects Cabell's legislation to be mirrored in several other states in the coming months, and they highlight the economic and environmental impact of Bitcoin mining.

Historically, the heavy energy use required for the computer systems used to mine Bitcoin, along with their production of electronic waste, has made it an environmentally costly currency, raising red flags and even leading to mining bans from state and national governments.

According to Satoshi, Bitcoin's decentralized nature allows mining operations to be set up anywhere, including locations where miners can capture methane gas to power their work. Advocates see this as an opportunity to partially address emissions from agriculture and the 300,000-700,000 orphan wells across the western half of the state.