- Texas senator proposes a digital currency backed by a Fraction of a Troy Ounce of Gold.
- The Comptroller shall take care of all the Gold reserves of the digital currency which would be swappable either against cash or physical Gold.
Although central banks across the world have been keen on introducing blockchain-based central bank digital currencies (CBDCs), many experts believe that a USD-pegged CBDC would be just another tool for the Federal Reserve to control the money supply.
As a result, some US lawmakers from Texas propose having a digital currency backed by physical Gold or cash. Texas Senator Bryan Hughes introduced Senate Bill 2334 while Representative Mark Dorazio introduced House Bill 4903 by proposing a state currency backed by Gold instead of dollars.
With the USD enjoying hegemony in the global financial system, it has given the US government the power to raise its debt ceiling every time. On the other hand, the Fed continues to print massive dollars every few years. However, amid the changing dynamics of global geopolitics, some top economies have started moving towards de-dollarization. Thus, it is likely that the yellow metal Gold will restore its importance back in the global financial market.
Republican Senator Bryan Hughes said that digital currency would represent a Fraction of a Troy Ounce of Gold while also proposing that the Texas Comptroller should create the asset. The Senator from Texas wrote:
The comptroller shall establish a digital currency backed by gold so that each unit of the digital currency issued represents a particular fraction of a troy ounce of gold held in trust.
Also, the Comptroller will act as a trustee for the holders of digital currency. It will also maintain “sufficient gold to provide gold redemption for all units of the digital currency that have been issued and not yet redeemed for money or gold.” Furthermore, the Comptroller should offer a means for the holder of digital currency to easily transfer them through any payment system.
Texas Government to Have a Gold-Backed Stablecoin
In the Senate Bill, the Texas lawmaker said that the digital currency reserves be 100% backed by Gold. Furthermore, to prevent any kind of manipulation, lawmakers would implement preventive measures.
Although unlimited purchases of digital currency are allowed, the comptroller should acquire the same fractional amount in troy ounces of Gold there ensuring its stability and backing. This would help in avoiding any future imbalance in the demand and supply of digital currency. The proposal notes:
The Controller should] buy a fractional number of troy ounces of gold equal to the number of units of the digital currency issued to the purchaser, and issue the purchaser a number of units of the digital currency equal to the amount of gold the comptroller purchases with the money received from the purchaser.
Whenever the buyer wants to sell their coins, the Comptroller should have an equal amount of cash reserves to cover the funds. Also, there would be designated agents who would facilitate the conversion of digital currency to physical gold.
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The proposal notes: “The comptroller, or a person with whom the comptroller has contracted, or a person serving as trustee for purposes of this chapter, may manage redemption of the digital currency for gold using bars or coins of standard sizes and may pay fractional remainders in cash as necessary to facilitate the transaction”.
While there has been chatter around USD losing its strength as countries opt for de-dollarization, MicroStrategy’s Michael Saylor said that the USD will still remain the world’s reserve currency in the future but shall be backed by Bitcoin.
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