While some US regulators propose launching a central bank digital currency (CBDC) controlled by the Federal Reserve that can be manipulated like the dollar, Texas wants a digital currency that can be exchanged for gold and physical cash.
Senate Bill 2334introduced by Senator Brian Hughes, W House Bell 4903put forward by Rep. Mark Dorazio, together they represent the first proposal for a nation’s currency not backed by dollars but by gold.
The gold standard…but with the evolution of encryption
Digital currency is a fraction of a troy ounce of gold — Republican Sen. Bryn Hughes, introduced in Senate Bill 2334, suggested the Texas comptroller create the asset, with its value represented by a fraction of an ounce of gold.
“The Controller shall create a gold-backed digital currency such that each unit of digital currency issued represents a certain portion of a troy ounce of gold held in the trust.”
The controller must also create a means for digital currency holders to easily transfer or assign them to others through any payment system.
Further, the Controller will act as custodian and fiduciary on behalf of digital currency holders, holding “sufficient gold to provide gold redemption for all digital currency units that have been issued and not yet redeemed for money or gold.”
A gold-pegged stablecoin backed by the Texas government
As per the bill, currency reserves must be 100% backed by gold. To prevent digital currency liquidity from being tampered with, lawmakers have implemented safeguards. Although unlimited purchases are allowed, the controller must have the same fractional amount in an ounce of gold to ensure its support and stability, avoiding any possible imbalance in the supply and demand of the digital currency.
“(The Controller shall purchase a fractional number of gold ounces equal to the number of Digital Currency Units issued to the Buyer, and shall issue to the Buyer a number of Digital Currency Units equal to the amount of gold the Controller purchases with the funds received from the Buyer.”
Thus, when the buyer wants to sell his coins, the designated controller or entity must have an equal amount of cash to cover the funds.
In addition, those who wish to exchange their coins for physical gold can do so through any designated agent, and receive their equivalent in small gold coins or large bars.
“The Controller, or any person contracted by the Controller, or a person acting as a trustee for the purposes of this chapter, may administer the redemption of the digital currency of gold using bars or coins of standard sizes and may pay the remainder the fractions of cash necessary to facilitate the transaction.”
This will not be the first government-backed digital currency. Although the digital dollar is still a long way from being implemented (and its issuance is not even certain), Miami and New York have already tested issuing their own official tokens.
It didn’t go well, but at least this is the beginning. Unlike these coins, whose value fluctuates, each Texas token will have an equivalent value in gold, similar to what Digix Gold Token and Pax Gold tokens, for example.
Currently, projects require approval at a committee hearing before they can become official law and receive approval by the Senate and House of Representatives. However, these projects show Texas’ interest in returning to the gold standard, which has boosted the American economy and trade for several years.
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