Republican Senator Bryan Hughes and Representative Mark Dorazio proposed new legislation in the Texas House and Senate to create a gold-backed cryptocurrency minted and controlled by the state that will effectively replace the central bank digital currency (CBDC) that is set to be issued by the U.S. Federal Reserve.
The move comes during a time when questions are being asked about the future of the U.S. dollar as the world’s reserve currency after the dollar lost almost all of its purchasing power over the last 50 years.
Recently, the BRICS nations, which include Brazil, Russia, India, China, and South Africa, and the ASEAN countries decided on replacing the dollar with their respective local currencies for cross-border trade settlements.
Several U.S. lawmakers have also called for reimposing the gold standard, and most recently, it was Representative Marjorie Taylor Greene of Georgia who advocated for the standard’s return.
The United States issued gold-backed dollars up until 1933 when President Franklin Roosevelt temporarily departed from the gold standard which led to it being abandoned as a global monetary system.
However, in 1971, President Richard Nixon axed the gold standard altogether in an attempt to “curb inflation” and prevent foreign nations from overburdening the dollar system by redeeming their greenback reserves for gold.
U.S. political figures, including Greene, Democratic presidential candidate Robert F. Kennedy Jr, Texas Senator Ted Cruz, and Florida Governor Ron DeSantis, have voiced their concerns against the creation of a CBDC. They say a digital dollar can be weaponized by the federal government to be used as a surveillance tool to control monetary transactions by American citizens.
Texas Lawmakers Want State to Issue Gold-Backed Crypto Token Replacing CBDC
Now Sen. Hughes has submitted Senate Bill 2334 and Rep. Dorazio offered the House Bill 4903 which would see the Texas comptroller introduce the first fully gold-backed digital currency issued by a state that is redeemable in cash or gold.
According to the legislation, the state comptroller must establish a mechanism that would allow for the gold-backed tokens to be used in everyday transactions. The bill also requires the comptroller to ensure that each unit of the cryptocurrency is represented by a particular fraction of a troy ounce of gold that is held in a secure reserve.
The state of Texas, which would hold the gold as a trustee, shall maintain enough amount of the asset in its reserves to provide redemption of all units of the digital currency that have been issued or yet to be redeemed for money in gold.
This means that the state comptroller or a designated company that would manage the reserve and distribution of the digital currency must have sufficient cash on hand to cover the expenses if a holder wishes to redeem their tokens. The bill also read that the tokens can be converted into physical gold coins or bullion bars at state-affiliated agencies.
The proposed legislation would allow individuals to purchase the crypto tokens from the state, which would then use the funds to buy more gold held in secure vaults, such as the Texas Bullion Depository.
If passed, the bill would allow the gold-backed crypto token to be easily transferable or assignable to any other person by electronic means and enable users to conduct transactions in sound money, potentially undermining the Federal Reserve’s controls over the U.S. monetary system.
Federal Government’s Crackdown on Alternative Currencies and Lawmakers’ Attempt to Block a U.S. CBDC
However, there is real concern that even if the Texas government were to pass the bill, it would be shot down by the U.S. Treasury Department. It will not be the first time the federal government has done so.
In March 2007, the U.S. government suppressed attempts by Bernard von NotHaus to create a gold-backed alternative currency called the ‘Liberty Dollar’. During the time, the FBI seized roughly nine tons of gold and silver from the company’s headquarters in Indiana. Liberty Dollar, which started in 1998, was the most successful alternative currency in the United States.
That same year, the federal government also shut down E-Gold, a digital currency project operated by Gold & Silver Reserve Inc. The company was accused of money laundering, conspiracy, and operating an unlicensed money-transmitting business.
It was reported that 13 different states, including Minnesota, Tennessee, Iowa, South Carolina, and Georgia, have attempted to issue alternative, state-managed, gold-denominated currencies over the last decade, only to be unsuccessful in their efforts.
Last month, Senator Ted Cruz reintroduced a bill in the U.S. Senate seeking to prohibit the Federal Reserve from launching a CBDC in the country.
The ranking member of the Senate Committee on Commerce, Science, and Transportation said the digital currency could be used as a “financial surveillance” tool to spy on Americans. Governor Ron DeSantis of Florida also introduced legislation proposing a complete ban on the use of a potential Fed-issued digital dollar as legal tender in the Sunshine State.