Proposed South Carolina Bill Lets State Treasurer Invest 10% Of State Funds In Bitcoin

South Carolina State Representative Jordan Pace made headlines yesterday by reintroducing Bill H. 4256, also known as The “Strategic Digital Assets Reserve Act Of South Carolina,” into the state’s House of Representatives. This bill aims to establish a Strategic Digital Assets Reserve, allowing the State Treasurer to invest up to 10% of the state’s funds into digital assets, including bitcoin, with a cap of one million bitcoin.

The primary motivation behind the creation of this reserve is to combat the effects of inflation on the state’s assets. The bill recognizes that bitcoin and other digital assets offer unique properties that can serve as a hedge against inflation and economic volatility.

One key aspect of the bill is the question of custody for the digital assets held in the reserve. While the bill does not specify whether state officials will hold the private keys, it does empower the State Treasurer to develop policies and protocols to safeguard the assets. This may include using cold storage or contracting a third party for custody services. Additionally, the State Treasurer can enlist the help of a third party for the creation, maintenance, and security administration of the reserve.

Transparency is a central theme of the bill, as the State Treasurer is required to prepare a biennial report detailing the total amount of digital assets in the reserve, their U.S. dollar value, and all related transactions and expenditures. Furthermore, the State Treasurer must publish proof of reserves, including public addresses of the digital assets, on an official state website. This measure allows citizens to independently verify the reserve’s holdings.

To ensure the integrity and security of the Strategic Digital Asset Reserve, the bill mandates annual independent audits. These audits will assess the quality of custody security solutions, compliance with laws, and internal controls against cyberattacks and mismanagement. Any recommendations from these audits must be addressed within 90 days, with follow-up reporting provided to the oversight committee.

Overall, Bill H. 4256 represents a bold step towards incorporating digital assets into South Carolina’s financial strategy. By establishing a transparent and secure reserve, the state aims to protect its assets against inflation and economic instability. It will be interesting to see how this bill progresses through the legislative process and what impact it may have on the state’s financial landscape.