South Carolina Bill Proposes Investing 10% of Public Funds into Bitcoin 

On Friday, Representative Jordan Pace introduced House Bill 4256 into the South Carolina House of Representatives, proposing the creation of a Bitcoin reserve to safeguard public funds from rising inflation and economic instabilities. 

South Carolina’s Proposed Bitcoin Strategic Reserve Aims To Protect Public Funds From Inflation And Economic Volatility

The “Strategic Digital Assets Reserve Act of South Carolina” would authorize the State Treasurer to allocate up to 10% of certain public funds, including the General Fund and Budget Stabilization Reserve Fund, for Bitcoin investments. The legislation has set a hard cap of 1 million BTC under the reserve and outlines a secure framework for custody, mandates regular public audits, and allows for voluntary Bitcoin donations from the state’s residents. 

The HB 4256 document states that the reason for establishing such a reserve is due to inflation “eroding” the purchasing power assets held in state funds, and decentralized digital assets such as Bitcoin and other cryptocurrencies offer “unique properties” that can act as a hedge against inflation and economic volatility. 

While Bitcoin is the only crypto asset named in the bill, it explicitly states that South Carolina’s digital asset reserve “may include, but is not limited to,” BTC, meaning that it allows for the future inclusion of other cryptocurrencies through updated rules.  

HB 4256 also sets high transparency standards by requiring the public disclosure of wallet addresses linked to the digital asset reserve. This proof-of-reserve will allow South Carolina residents and outsiders to independently audit transactions and verify holdings on the blockchain to ensure that any digital asset investments do not exceed 3% of the state’s overall investment portfolio. 

HB 4256 Directs SC State Treasurer To Produce Biennial Report of Bitcoin Holdings Within The Strategic Reserve

While it does not stipulate whether or not state officials should hold the private keys to the reserve wallet, it directs the State Treasurer to develop policies and protocols to protect the assets within the reserve, including the use of cold storage or contracting a certified custodian to manage the assets. The South Carolina Treasurer can also utilize a third party to assist in the creation, maintenance, and administration of the reserve’s security. 

The State Treasurer would be responsible for preparing a biennial report that includes the total amount of digital assets held in the reserve, the U.S. dollar value of those assets, and the transactions and expenditures made since the previous reporting period. The bill also stipulates that the Strategic Digital Asset Reserve undergo several audits, such as an examination of the quality of the security of custody solutions, an assessment of compliance with local, state, and federal laws, and an evaluation of internal controls to mitigate against cyberattacks and mismanagement. 

HB 4256 directs that independent audits should be conducted annually and submitted to the relevant oversight committee. Any recommendations resulting from the audit must be addressed within 90 days of the report’s issuance date, and a follow-up report detailing corrective actions must also be submitted to the committee. 

The Strategic Digital Assets Reserve Act of South Carolina bill would expire on September 1, 2035, unless renewed, giving the state a 10-year window to experiment with incorporating Bitcoin into its public finance strategy. 

Rep. Pace wrote in an X post that he is proud to file legislation empowering South Carolina to follow President Donald Trump’s lead to create a state-level strategic crypto reserve. He also noted that the digital asset stockpile would give the State Treasurer new tools to protect taxpayer dollars from inflation. 

U.S. Federal And State Government Initiatives To Incorporate Bitcoin Into Fiscal Strategy 

In early March, President Trump signed an executive order to create a Strategic Bitcoin Reserve and U.S. Digital Asset Stockpile, which would be initially capitalized with BTC and other cryptocurrencies under the custody of federal law enforcement as proceeds from criminal investigations. The EO also directs the Department of Commerce and the Department of Treasury to develop a plan to acquire additional Bitcoin in a “budget-neutral” way, without any incremental cost to taxpayers. 

Senator Cynthia Lummis of Wyoming followed up by introducing the BITCOIN Act, which would require the U.S. government to purchase up to 1 million BTC, worth $80 billion at current rates, for the strategic Bitcoin reserve over a five-year period. 

South Carolina’s move is part of a wider nationwide trend of states exploring the possibility of adding Bitcoin into their respective reserve funds. 

Recently, Arizona’s House of Representatives advanced two major digital asset bills to a full vote, which includes one that would allow the Stae Treasurer and retirement system to create a Bitcoin reserve and another to manage crypto seized from criminal cases. Similarly, the Texas Senate passed the SB 21 Bitcoin Strategy Reserve bill, which now awaits Governor Gregg Abbot’s signature to become law. 

In Oklahoma, HB 1203 passed with an overwhelming majority and is awaiting Senate review. Kentucky passed legislation protecting residents’ right to crypto self-custody and offering tax incentives for Bitcoin miners. Utah also passed a similar legislation, but it removed references to a strategic digital asset reserve at the last minute, citing volatility concerns. 

However, some states are bucking the trend for now. Recently, a strategic Bitcoin reserve proposal introduced in the Wyoming Senate was voted down in committee. Governor Mark Gordon stressed the need for a more conscious approach to creating a digital asset stockpile. Speaking at the DC Blockchain Summit last week, he said that Bitcoin has been “incredibly volatile”. 

But Wyoming is moving forward with its plans to launch a state-managed, dollar-denominated stablecoin. The WYST token, issued by blockchain interoperability protocol LayerZero, is currently being tested on Ethereum, Solana, Arbitrum, and Base blockchains and is expected to be released in July. 

Montana, North Dakota, and Pennsylvania are other states that killed proposals to establish state-led strategic Bitcoin reserves. 

At the time of writing, Bitcoin (BTC) is trading at $83,882 – down 2.69% in the last 24 hours.