Senator Bryan Hughes and Representative Mark Dorazio, both Republicans from Texas, have proposed the creation of a gold-backed digital currency through legislation that the state legislature may enact. According to these policymakers, this currency could offer numerous advantages to the Lone Star State and serve as an alternative digital currency that would allow Texas residents to avoid a central bank digital currency (CBDC).
The state comptroller of Texas would be obligated to produce a digital currency that is fully supported by gold and convertible for either cash or gold, according to legislation that has been proposed by Texas state legislators. Additionally, the comptroller has to create a mechanism that allows the usage of gold-backed digital currency in everyday transactions.
Texas Proposes Gold-Backed Digital Currency
In recent times, discussions among U.S. lawmakers regarding the reintroduction of the gold standard have taken place. Most recently, Georgia representative Marjorie Taylor Greene voiced her support for the idea. Certain bureaucrats have voiced their opposition to the creation of a central bank digital currency (CBDC), with prominent politicians such as Ted Cruz, Ron DeSantis, Robert F. Kennedy Jr. and Greene also joining in the opposition.
The bill has been introduced by two Texas lawmakers (S.B. No. 2334) that would permit the state to establish a gold-backed digital currency.
The bill’s sponsors, namely Hughes and Dorazio, have stated that the comptroller shall establish a gold-backed digital currency, whereby every unit of the currency will correspond to a particular portion of a troy ounce of gold that is kept in trust. Furthermore, the trustee will keep a sufficient amount of gold to redeem all outstanding units of the digital currency for gold or cash. Although the gold standard was removed from the United States long ago, if the bill receives attention, the U.S. Treasury Department may not approve Texas’s attempt to create a digital currency supported by gold. The U.S. government has also prevented private creations of gold-backed alternative currencies in the past.
In 2007, the FBI seized nearly nine tons of gold and silver from Bernard von NotHaus’s Liberty Dollar headquarters. The U.S. government also closed down the e-gold digital currency project run by Gold & Silver Reserve Inc. (G&SR) in the same year. However, the proposed gold-backed digital currency in the Texas bill would be managed by the state government, although 13 different states have failed to create alternative, state-run, gold-backed currencies over the last 14 years.
Texas’s planned gold-backed digital money will be kept in a trust that the state comptroller will be in charge of managing. The bill specifies that “certain money and deposits held in the trust are not subject to legislative appropriation.” Additionally, the Texas lawmakers have emphasized that the comptroller, in establishing the digital currency, must also create a mechanism that will enable holders of the currency to easily transfer or assign it to another person electronically.
Central Bank Digital Currencies
The introduction of a gold-supported digital currency could serve as a viable option for individuals and corporations seeking to circumvent the use of central bank digital currencies (CBDCs). Digital currencies are essentially virtual coins or banknotes stored in an electronic wallet on a computer or smartphone. Unlike peer-to-peer electronic cash, such as Bitcoin, CBDCs are backed and regulated by the government, in the same way, that traditional fiat currencies are.
The move towards the development of CBDCs is primarily driven by the “war on cash,” where the elimination of cash can potentially enable the government to monitor and influence consumer spending habits. Currently, Nigeria is attempting to encourage its citizens to embrace its CBDC, albeit with significant resistance, while China, India, and the US have all commenced pilot programs to trial their respective CBDCs.
In a world without physical currency, even the most minor transactions would be subject to government surveillance. For example, a simple morning visit to a local coffee shop would no longer be private. Bloomberg, in an article published during the launch of China’s digital yuan pilot program in 2020, observed that digital currencies “provide Chinese authorities with a level of control that was never possible with physical money.” The implementation of a gold-supported digital currency would provide an alternative solution to CBDCs.
Final Thoughts
Texas lawmakers are proposing the creation of a state-run, gold-backed digital currency that would be kept in a trust administered by the state’s comptroller, according to legislation that the state legislature may enact. The introduction of a gold-supported digital currency could offer an alternative to central bank digital currencies (CBDCs) and provide numerous advantages to the Lone Star State, though approval from the U.S. Treasury Department may be difficult to obtain.