Last month, Texas State Senator Bryan Hughes and House Representative Mark Dorazio introduced two identical bills supporting the establishment of a digital currency backed by gold in Texas.
The bills introduced in the Texas House (HB4903) and Senate (SB2334) on March 10 would create a state-issued, gold-backed digital currency. They would require the state comptroller to establish a digital currency that is fully backed by gold and ensure that the state of Texas “maintain[s] enough gold to provide for the redemption in gold of all units of the digital currency that have been issued and are not yet redeemed for money or gold.” In practice, that would mean individuals could redeem their digital currency for cash or gold at any time.
Notably, this is not the first time US Republicans have supported the case for a return to some sort of gold standard. Gold acted as the basis of the international monetary system during a good part of the 19th and 20th centuries, but this framework was largely abandoned due to its propensity for volatility and its constraints on governments’ monetary policy. In recent decades, however, many in the Republican party have tried to revive the idea of linking the dollar to the precious metal to show commitment to conservative ideals and demonstrate disdain for current monetary policies, namely the unconstrained increase in the money supply.
One implication of a gold-backed digital currency is that it would create an alternative for individuals and businesses to avoid a central bank digital currency (CBDC). Several US Republicans have argued that a government-controlled digital dollar could be weaponized into a surveillance tool, with Florida Governor DeSantis and Texas Senator Cruz going as far as proposing bans on a retail digital dollar. They worry that the dwindling use of cash and the rise of CBDCs creates the potential for the government to track and even control individuals’ spending.
The two bills are at an early stage and both had their first reading on March 23 and were referred to Committees. They must still pass a hearing and voting rounds before being signed into law.