State senators propose bill to allocate Georgia funds into Bitcoin
State senators in Atlanta have introduced Senate Bill 178, aiming to allow the state treasurer to invest up to 5% of any state fund into Bitcoin. This proposal would modify state statutes, granting the State Depository Board the authority to permit the state treasurer to explore future investments in Bitcoin exclusively, rather than encompassing multiple decentralized online currencies. The bill seeks to ensure that a designated “qualified custodian” holds the private keys for blockchain transactions, managing them on behalf of the state from a federally or state-chartered bank, trust company, or special purpose depository institution approved by the state for digital asset holdings.
In considering Bitcoin’s investment potential, it is unique in its volatility compared to traditional asset classes. Cryptocurrency analyst Clark Howard pointed out back in 2018 that the defining challenge of cryptocurrencies like Bitcoin was their extreme price fluctuations, posing risks that differ from conventional financial instruments. He expressed skepticism about regarding cryptocurrencies as real money due to their price instability.
Over the past month, Bitcoin has seen oscillations spanning from $95,099 to $105,559.40, experiencing sharp fluctuations in value. Currently valued at $98,661.16, it is indicative of the cryptocurrency’s inherent volatility. Howard’s contention that real money should offer stability in purchasing power underscores the concerns regarding Bitcoin and similar cryptocurrencies’ speculative nature.
The proposed legislation raises the significant possibility of channeling billions from the state’s funds into Bitcoin. With Georgia holding $36.3 billion in Georgia Fund 1 assets as of December 2024, investing up to 5% could entail an allocation of approximately $1.82 billion. Despite Bitcoin’s price volatility, the bill suggests protective measures to safeguard the state’s funds against potential risks.
Establishing a secure custody solution to safeguard the private keys for Bitcoin investments, the proposed legislation advocates a comprehensive defense system with multiple layers of protection:
– Exclusive knowledge and access to private keys by the government entity
– Encryption of private keys in a secure environment with access only through end-to-end encrypted channels
– Exclusion of private keys from smartphones
– Maintenance of hardware holding private keys in geographically diversified secure data centers
– Enforcement of multiparty governing structure for transaction authorization, user access controls, and logging user-initiated actions
– Regular security tests through code audits and penetration testing
Beyond merely purchasing digital assets, the bill suggests they be held directly through a secure custody solution by a qualified custodian, or in the form of an exchange-traded product from a registered investment company. Additionally, the state treasurer could potentially lend some assets, provided it does not increase financial risk and with the State Depository Board’s approval.
Although the proposed legislation has yet to undergo committee scrutiny, its potential implications warrant further examination to decipher the viability of implementing these regulatory changes within existing frameworks.
