Texas Just Delivered Incredible News to Bitcoin Investors Everywhere

File this under "More proof that Bitcoin (CRYPTO: BTC) is going mainstream." At the end of June, Texas signed into law a Strategic Bitcoin Reserve that will invest in Bitcoin. Texas becomes the third state to do so, joining New Hampshire and Arizona.

This is fantastic news for Bitcoin investors everywhere. Although the state's initial $10 million investment won't affect Bitcoin's price, there are a number of reasons why the move is significant.

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Texas commits public funds to Bitcoin

Most importantly, Texas made a commitment to dedicate public funds to a stand-alone Strategic Bitcoin Reserve. In other words, actual taxpayer money is going to be spent on buying Bitcoin.

This goes further than even the federal Strategic Bitcoin Reserve that President Donald Trump established in March. The White House executive order creating the federal Strategic Bitcoin Reserve specifically noted that all future Bitcoin purchases must be "budget-neutral." The initial establishment of the reserve was to be funded from Bitcoin previously confiscated by the government. As a result, the U.S. government is not spending any new money on Bitcoin, at least for now.

Image source: Getty Images.

Obviously, spending taxpayer money on Bitcoin has the potential to be extremely controversial. How many times have you turned on the TV, only to hear some talking head on a news program complaining about such-and-such spending being "a waste of taxpayer dollars"?

If the price of Bitcoin continues to go up, of course, nobody is going to complain. But what if the price of Bitcoin sinks? Somebody within the Texas state government is going to have some serious explaining to do, especially when it comes time to run for reelection.

Texas designates Bitcoin as a strategic asset

Texas also made it very clear that Bitcoin -- just like oil or gold -- is a "strategic asset." As such, Texas is taking some very specific steps to protect this investment. For one, it has created a stand-alone financial structure for the reserve, such that any Bitcoin holdings cannot be commingled with other state funds. The Bitcoin reserve will act independently of the state's general treasury system.

Moreover, the fund is supposed to hold Bitcoin for the long haul. Every two years, the state will review its Bitcoin holdings. Lawmakers say that they have put safeguards in place that will prevent any of this Bitcoin from being sold to meet short-term budgetary needs.

Does the new Texas Bitcoin reserve go far enough?

Of course, some skeptics say that the new Texas Strategic Bitcoin Reserve does not go far enough. For example, the state cannot accept Bitcoin for payments, and that will limit the ability of the reserve to grow over time. When early versions of this reserve bill first appeared, there was talk that Texas might be willing to accept certain payments, such as payments for licenses or registrations, in the form of Bitcoin, as a way of building up the reserve.

Moreover, some have questioned whether the Texas Bitcoin reserve might just be one giant publicity stunt. After all, Texas has a $338 billion biennial budget. So an initial investment of $10 million into Bitcoin is almost a rounding error. As one skeptic pointed out, it would be much like someone earning $80,000 per year deciding to invest $4 into the stock market.

A potential template for other states to follow?

That being said, the establishment of the Texas Strategic Bitcoin Reserve deserves kudos. As they say down in the Lone Star State, "Everything is bigger in Texas." And that now includes Bitcoin.

If nothing else, the new reserve is a signal that the state of Texas is innovative, forward-thinking, and committed to crypto. If you're a Bitcoin miner, that might make you decide to relocate to Texas. Crypto start-ups that might have once launched in Silicon Valley might decide to launch in Texas instead.

This Texas Strategic Bitcoin Reserve could become a template for other states to follow. At least 28 states now have some form of Bitcoin reserve legislation in the works.

Steps taken by Texas to fund its new Bitcoin reserve will likely also give new momentum to the federal Strategic Bitcoin Reserve. If Texas can find clever new ways to fund its reserve, it might open the door to similar types of "budget-neutral" moves by the federal government.

If the federal government ever launches a full-scale Bitcoin program, that's when the price of Bitcoin could really take off. So keep your eye on what's happening deep in the heart of Texas -- at some point, it could start to impact your investment portfolio.

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Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.