Texas has officially taken the first step towards becoming the first state in the U.S. to classify Bitcoin as a strategic reserve asset.
Written by: Oluwapelumi Adejumo
Translated by: Saoirse, Foresight News
Texas has officially taken the first step towards becoming the first state in the U.S. to classify Bitcoin as a strategic reserve asset.
On November 25, Lee Bratcher, chairman of the Texas Blockchain Council, revealed that this $2.7 trillion economy, ranked eighth in the world, has purchased $5 million worth of BlackRock's spot Bitcoin ETF (ticker IBIT).
He added that once the state finalizes the custody and liquidity framework required by the new reserve legislation, a second $5 million allocation will be used for direct acquisition of Bitcoin.
These two funds will bridge the current institutional operating model with a future government model that "not only purchases Bitcoin but also holds Bitcoin."
Texas is building the first state-level Bitcoin reserve blueprint
Texas initially did not directly hold Bitcoin on-chain but chose to enter through IBIT. For large funders looking to allocate Bitcoin within a familiar regulatory and operational framework, IBIT has become the default choice.
The legal basis for this purchase is Senate Bill 21, which was signed by Governor Greg Abbott in June this year, officially establishing the "Texas Strategic Bitcoin Reserve."
According to the bill's framework, as long as Bitcoin maintains an average market value of no less than $500 billion for 24 months, the state auditor has the authority to continue increasing its holdings of this asset. Currently, Bitcoin is the only cryptocurrency that meets this market cap threshold.
The reserve system operates independently of the state treasury and clarifies the governance processes related to asset holdings, establishing a consulting committee responsible for risk monitoring and oversight.
Although the initial investment of $5 million is relatively small compared to Texas's overall financial scale, the operational logic of this transaction is far more significant than the amount of funds involved.
Texas is testing whether Bitcoin can be formally included in the category of public reserve tools within a state-level financial system that has managed a multi-hundred billion dollar diversified fund pool.
Once the relevant operational processes are implemented, the second fund will be used for "self-custody of Bitcoin"—this model will have a distinctly different impact on asset liquidity, transparency, and auditing processes.
Texas is currently designing a "sovereign-level custody" process, rather than adopting a traditional institutional brokerage model. This reserve system will require qualified custodians, cold storage facilities, key management protocols, independent auditing mechanisms, and regular reporting systems.
These elements will form a replicable template that other states can directly adopt without redesigning their governance structures.
Why did BlackRock's IBIT become Texas's first choice?
Choosing to enter the Bitcoin market through IBIT does not mean Texas prefers ETFs over native Bitcoin; it is essentially a pragmatic workaround based on operational realities.
IBIT has only been launched for two years but has already become the most widely held Bitcoin ETF among mainstream institutions. As the largest Bitcoin ETF product currently, its cumulative net inflows have exceeded $62 billion.
(Image caption: Cumulative net inflow data for BlackRock's IBIT, source: SoSo Value)
Moreover, most regions have yet to establish a public sector Bitcoin self-custody system, and building such infrastructure requires completing a series of complex processes, including procurement, security modeling, and policy approval. Therefore, Texas has adopted IBIT as a "transitional tool"—to achieve Bitcoin asset allocation through IBIT while perfecting the permanent reserve structure.
This "roundabout strategy" is highly relevant, as it closely resembles the layout paths of other large funders.
Harvard University disclosed that IBIT has become one of its largest U.S. stock holdings in the third quarter; the Abu Dhabi Investment Authority increased its IBIT holdings to approximately 8 million shares, doubling its previous amount; and Wisconsin's pension system also allocated over $160 million in the spot Bitcoin ETF space through IBIT earlier this year.
The trend is quite clear: despite differences in investment goals, regional attributes, and risk frameworks among various institutions, they have all coincidentally chosen IBIT as a tool. The core advantage of IBIT lies in its provision of custody services through well-known intermediaries, simplifying reporting processes, and meeting the clear accounting requirements under the new fair value rules effective in 2025.
These conveniences make IBIT the "default entry point" for public and quasi-public institutions to allocate Bitcoin. Texas's uniqueness lies only in the fact that its allocation of Bitcoin through IBIT is a "temporary transitional" action.
What impact would it have if other states follow suit?
The more critical question is: is Texas's action an isolated case, or will it become a blueprint for other states to follow?
Bitcoin analyst Shanaka Anslem Perera stated:
"This chain reaction is foreseeable. Within the next 18 months, it is expected that 4 to 8 states will follow suit, collectively controlling reserve funds exceeding $1.2 trillion. In the short term, driven by the 'herd effect,' institutional inflows are expected to reach between $300 million and $1.5 billion. This is not speculation, but a practical application of game theory that is happening."
Currently, politically aligned states such as New Hampshire and Arizona have already introduced laws related to Bitcoin reserves—viewing Bitcoin as a strategic asset to hedge against risks in the global financial system.
More states may join this trend in the future: with the new accounting standards eliminating the previous punitive clauses for "mark-to-market" valuations, these states can utilize structural surplus funds to allocate Bitcoin, achieving asset diversification.
Furthermore, the involvement of state governments in the Bitcoin market has implications that go far beyond "symbolic significance." ETF purchases do not change the circulating supply of Bitcoin, as the trust structure does not remove Bitcoin from the liquidity market when issuing and redeeming shares.
In contrast, "self-custody" would have the opposite effect: once Bitcoin is purchased and transferred to cold storage, it exits the tradable liquidity pool, reducing the supply of Bitcoin available to exchanges and market makers.
If Texas expands its Bitcoin reserve scale from the initial $10 million, the aforementioned differences will have a significant impact. Even if the state-level demand is not large, it will introduce a new type of buyer participant—whose behavior is counter-cyclical to that of "noise traders" (referring to investors or trading entities in financial markets who trade not based on rational analysis, real market information, or fundamental logic, such as company earnings or macroeconomic data, but are driven by irrational factors)—and will not frequently adjust their positions.
This impact is more like a "stability anchor" rather than a source of volatility. If other states adopt similar policies, the elasticity of the Bitcoin supply curve will further decrease, and price sensitivity will increase.
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