As bitcoin scales new heights and recaptures the public’s imagination, legislators are going all in on a digital gamble
By Trevor Bach
https://www.dallasnews.com/
In April 2022, Mattie Parker, the then 38-year-old mayor of Fort Worth, began a social media livestream in front of what appeared to be a noisy City Hall IT closet.
It was actually a data center, newly outfitted with a donated small-scale crypto rig — three computers that had been specially designed to perform trillions of calculations per second, in the hope of sooner or later landing on a sequence of numbers that would crack a highly complicated algorithm.
Standing alongside a gray-suited crypto lobbyist, and with servers humming, Parker cheerfully announced that her city was about to become the first local government in the United States to mine bitcoin.
“I’ve been joking that we’re Cowtown and cryptocurrency, right?” she said near the end of the three and a half-minute promo. “It’s all happening in Fort Worth.”
Only it’s not just Fort Worth.
With bitcoin recently hitting new records above $100,000 — a surge boosted by a crypto-friendly new presidential administration and a pro-bitcoin reversal from JPMorgan Chase’s powerful CEO, Jamie Dimon — an array of influential Texans are working to transform the Lone Star State into a global crypto capital.
It’s a push that’s been underway for years, and coincides with an influx of some of the world’s largest crypto mining facilities as well as dozens of small startups. On Wednesday, crypto-friendly state lawmakers scored a high-profile win when they passed legislation to create a new digital coin reserve.
“Bitcoin doesn’t need Texas,” said Brian Morgenstern, a policy adviser for the Texas Blockchain Council, the state’s leading crypto lobbying group. “Texas and the United States need bitcoin, because it’s this modern phenomenon that is an outstanding asset. It’s proven that over its lifetime, and I think it’s an opportunity for the state to show leadership in technology.”
Others see glaring digital red flags. Large-scale bitcoin mining also comes with voracious power needs, which, along with the rise of data centers, pose a stiff challenge to Texas’ already fragile energy grid. Crypto’s inherently volatile price swings also mean any public investment could go bust just as easily as it booms.
“This absolutely makes zero economic sense,” Ed Hirs, an energy economist at the University of Houston, said of the new state reserve plan. “And the question is: Why would the state commit real money to purchase play money?”
The start of a digital gold rush
Texas’ all-out crypto push began in earnest around 2021, as bitcoin surged to more than $50,000, up from below $4,000 in early 2019. That fall, China — once home to most of the world’s crypto mining — announced it was banning the practice entirely, because of concerns around illicit activity.
The news intensified a global competition for new mining locations — and the astronomical amounts of energy needed to sustain them — as well as industry-friendly jurisdictions.
The business-friendly Lone Star State had an early start: Drawn to its reputation for light regulation, a host of crypto-related companies — including the Fort Worth-based Coinsource, at one time the world’s largest Bitcoin ATM operator — had already set up shop.
So had two of North America’s largest mining operations: one run by Bitdeer, a spinoff of the Chinese crypto giant Bitmain, and another by Colorado-based Riot Platforms. Both situated themselves on a shuttered aluminum plant site in Rockdale, about an hour northeast of Austin.
Spurred on by the Texas Blockchain Council, the legislature that year passed one measure to create a crypto policy working group, with the aim of creating a kind of state legislative roadmap.
A separate “Virtual Currency Bill” clarified crypto’s legal status within Texas’ Uniform Commercial Code, a set of rules that serve as the regulatory backbone of state commerce. Texas Governor Greg Abbott, a longtime crypto fan who accepted political campaign donations in Bitcoin as far back as 2014, eagerly signed both.
“Blockchain is a boomingindustry that Texas needs to be involved in,” he said after signing the first bill, referring to it as a “master plan” for the state. “Texas will be the crypto leader,” he wrote a couple weeks later.
The legislation helped kick off a new Lone Star crypto frenzy, drawing more blockchain-related startups to D-FW and, especially, Austin. In Houston, H-E-B launched a pilot program that installed Bitcoin ATM kiosks outside dozens of its grocery stores, while the Dallas Mavericks — which were already accepting payments in both Bitcoin and Dogecoin — launched a multiyear sponsorship deal with the crypto brokerage platform Voyager Digital.
The partnership kicked off with a ceremony inside American Airlines Center that included a snappy, pre-recorded video ad for Voyager featuring the Mavericks’ drumline. Champ, the team’s blue-furred horse mascot, even danced inside the center circle.
“I gotta add, I am a customer and I’ve been a customer for several months,” Mark Cuban, the then-majority owner of the Mavericks and a well-known crypto advocate, said from the arena floor moments later. “It’s easy, it’s cheap, it’s fast and the pricing is actually really good, so we find it as a perfect fit for our Mavs fans and reaching Mavs fans of all ages.”
Lured by a combination of available power and various state incentive programs, crypto mining companies continued to flock to Texas. By late 2021, the U.S. had taken over China’s place as the world’s bitcoin mining leader — and the state was solidifying its place as the country’s most popular place to mine.
Exact counts are hard to come by, but Lee Bratcher, the founder and president of the Texas Blockchain Council, estimates that about 40 crypto mines are currently operating within the state, a number that likely represents more than a quarter of all commercial crypto mines in the U.S. In late 2023, The New York Times also reported that 10 of the 34 large-scale bitcoin mining operations it identified in the U.S. were in Texas.
“Texas has been very business friendly,” Dave Perill, the CEO of Compute North, a Minnesota-based crypto mining infrastructure company, told Bloomberg in 2021. And the Electric Reliability Council of Texas (ERCOT) “is one of the largest deregulated energy grids in the world.”
‘The future of finance is digital’
Advocates have generally framed Texas’ crypto push, and now the likely new state reserve, as a critical part of the state’s ambitious economic vision, an initiative that also includes Y’all Street, the catchall nickname for an emerging Dallas financial hub that could include as many as three new stock exchanges.
“I think most people realize that this is about human flourishing, and this is about, ‘the future of finance is digital,’” said Bratcher. “I think what it represents is: Texas is leaning forward. We are welcoming to capital formation and jobs and entrepreneurs that are coming from all over the country, particularly the West Coast, and we want them to build their businesses here.”
Yet the state’s multiyear crypto experiment has also been fraught. Residents in places where large mining centers are already established — like Granbury, in Hood County southwest of Fort Worth — have complained of sleep deprivation and other health issues, even likening the machines’ constant noise and lights to a kind of torture.
FBI officials and the Texas State Securities Board have issued numerous local fraud warnings, and the young industry, while crowning millionaires, has also occasionally wrought havoc in the markets, leaving a trail of financial destruction in its wake. In July 2022, eight months after the Mavericks kicked off their Voyager Digital partnership, the platform ended up filing for bankruptcy. Cuban is still fighting allegations from a class action suit that he duped investors in “a massive Ponzi scheme.”
And then there’s actual mining, which consumes enormous amounts of electricity and water — resources that are under increasing demand as Texas’ population continues soaring, and can lead to higher prices for ordinary Texans.
As of last summer, miners in the state were already using about as much power as the city of Austin, according to an estimate from an ERCOT official, with an equal amount of usage approved to be soon added. A 2023 analysis from the global data analytics firm Wood Mackenzie also found that bitcoin mining was already raising the state’s overall electricity costs by about 5%, or $1.8 billion annually.
Under an energy demand agreement with ERCOT, in moments when demand surges, such as natural disasters, taxpayers can also end up paying millions to bitcoin mining companies to compensate them for not mining. In 2021, when Winter Storm Uri thrust the state into a deep freeze and simultaneously devastated its power supply, ERCOT ordered Bitdeer’s Rockdale mine to shut down to preserve other power sources. But it had to pay the company an average of $175,000 an hour to do so, costing the state more than $18 million.
“Ironically, when people are paying the most for their power, or losing it altogether, the miners are making money selling energy back to Texans at rates 100 times what they paid,” Hirs told The Times.
Industry advocates counter that mining companies mostly shut down voluntarily during crises, and that the arrangement actually benefits Texas’ power supply by incentivizing more generation — including in remote places like West Texas —and then restoring capacity back to the grid when the state most needs it.
“Bitcoin miners respond to price,” said Bratcher. “As price increases, bitcoin miners turn off, and as price comes back down, they turn back on, which is unlike any load on the grid.”
Texas politicians from both sides of the aisle, many of whom have received donations from the industry,have mostly fallen in line.
Two years ago, the state legislative session — which came on the heels of a broad crypto crackdown tied to the fall of the now-imprisoned entrepreneur Sam Bankman-Fried — produced one state law that aimed to bolster the industry by imposing new regulations to protect individual crypto traders.
It also killed another proposal, sponsored by three Republican senators that would have put limitations on the state’s cryptomining tax breaks. In an open letter published as the bill was being considered, two prominent Texas bitcoin advocates wrote that it would send “loud signals that Texas is not the free, deregulated market everyone believes it to be” and that the state was “antagonistic to bitcoin broadly.”
Senate Bill 21, the new state reserve bill, was introduced by Sen. Charles Schwertner (R-Georgetown), who chairs the Senate’s powerful Committee on Business and Commerce, and sponsored in the House by Rep. Giovanni Capriglione (R-Southlake), who chairs that chamber’s Delivery of Government Efficiency committee, a nod to the Elon Musk-led federal DOGE initiative.
The legislation — which has passed both chambers and will head to the governor’s desk pending Senate concurrence with the House’s latest revisions — creates a framework for a new public fund made up of bitcoin and potentially other qualifying cryptocurrencies that would be managed by the state comptroller, in conjunction with a small advisory committee. “This bill embraces digital innovation,” Capriglione argued on the House floor last week, “by allowing Texas to prudently invest in bitcoin and other established cryptocurrencies.”
It also mirrors a broader national push: In March, President Donald Trump — a recent convert whose family owns a number of crypto ventures — signed an executive order for a federal stockpile, while various state-level reserve efforts are also underway.
The Texas bill doesn’t specify how much public money will actually go in — the legislature would still need to appropriate funds — but its most vocal backers argue that any funding will send a powerful signal to the burgeoning crypto industry and double as a smart investment for taxpayers.
“Bitcoin is the best performing asset over the last decade,” said Bratcher, “and so for Texas to have Bitcoin in a reserve, the asymmetric risk return profile is quite good.” Schwertner, who did not respond to multiple inquiries from The Dallas Morning News, has called the fund “a historic step toward securing our state’s financial future.”
It would also represent something of a strange milestone for crypto itself — a technology that was originally designed as an alternative to fiat money that by nature would steer clear of governments altogether.
“It’s also backwards to our values in Texas,” said John Griffin, a finance professor at UT Austin. “Basically, you have a conservative legislature saying, ‘we want less government,’ and yet here’s a case where you are wanting or encouraging government to speculate and possibly prop up an asset class.”
This story, originally published in The Dallas Morning News, is reprinted as part of a collaborative partnership between The Dallas Morning News and Texas Metro News. The partnership seeks to boost coverage of Dallas’ communities of color, particularly in southern Dallas.
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