by Jordan Finneseth, Kitco:
As lawmakers in the U.S. introduce bills pushing back against the creation of a U.S.-dollar-based central bank digital currency (CBDC), Texas is opting to go a different route with the creation of a state-issued, gold-backed digital currency.
Based on the text of Senate Bill 2334, which was introduced by state Senator Bryan Huges (R), and House Bill 4903, which was introduced by state Representative Mark Dorazio (R), the legislators are looking to require the state comptroller to establish a digital currency that is fully backed by gold and fully redeemable in cash or gold.
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“The comptroller shall establish a digital currency that is backed by gold so that each unit of the digital currency issued represents a particular fraction of a troy ounce of gold held in trust,” the bills state, adding that if needed, a private vendor can be enlisted to help establish the digital currency.
The comptroller would also be required to create a mechanism that would allow the new gold-backed digital currency to be used by citizens for their daily transactions. “In establishing the digital currency the comptroller shall establish a means to ensure that a person who holds the digital currency may readily transfer or assign the digital currency to any other person by electronic means.”
All gold reserves backing the digital currency would be held in a trust with the Texas Bullion Depository that is controlled by the comptroller or another entity appointed by the comptroller. “The trustee shall maintain enough gold to provide for the redemption in gold of all units of the digital currency that have been issued and are not yet redeemed for money or gold,” the bills read.
There will be no limit on the amount of gold-backed digital currency that Texans can purchase. As soon as a purchase is made, the comptroller will be required to “buy a fractional number of troy ounces of gold equal to the number of units of the digital currency issued to the purchaser, and issue to the purchaser a number of units of the digital currency equal to the amount of gold that the comptroller purchases with the money received from the purchaser.”
When someone holding the digital currency wants to redeem it for cash, all they would need to do is present it to the comptroller or a designated agent, who will then sell gold held in the depository account equal to the redemption amount and transfer the funds to the redeemer, minus any fees.
Holders can also elect to redeem the digital currency for gold. The comptroller or one of its designated agents “may manage redemption of the digital currency for gold by the use of bars or coins of standard sizes and may pay fractional remainders in cash as necessary to facilitate the transaction,” the bill states.
