Behind a Texas bill, a push to make gold ‘functional money’

More than 50 years after the United States abandoned the gold standard, Texas lawmakers are moving to bring precious metals into everyday use. The new legislation, House Bill 1056, aims to give Texans the ability, likely through a mobile app or debit card system, to use gold and silver they hold in the state’s bullion depository to purchase groceries or other standard items. The bill would also recognise gold and silver as legal tender in Texas, with the caveat that the state’s recognition must also align with currency laws laid out in the US Constitution. “In short, this bill makes gold and silver functional money in Texas,” Rep. Mark Dorazio, R-San Antonio, the main driving force behind the effort, said during one 2024 presentation. “It has to be functional, it has to be practical and it has to be usable.”

After picking up major amendments in the Senate aimed at ensuring the legislation complies with existing laws — most notably, the Senate nixed language from an earlier version that sought to establish an entirely new digital currency based on the metals — the proposal cleared both legislative chambers late last week, and was sent to the governor’s desk on Sunday. Governor Greg Abbott does not appear to have indicated whether he intends to sign the bill. In a statement, Abbott’s press secretary, Andrew Mahaleris, said the governor “will thoughtfully review any legislation sent to his desk.” Dorazio and state Sen. Bryan Hughes, R-Mineola, who authored a companion bill in that chamber, did not respond to requests for comment.

This year’s gold and silver legislative push comes roughly a decade after Texas created the country’s first state-run precious metals depository — and as Republican lawmakers around the country are pushing more broadly to move away from dependence on fiat currency, or money issued and backed by a central government. To date legislators in at least 11 states, including Utah, Oklahoma, Kansas, Arizona and West Virginia, have introduced bills that declare gold and silver as legal tender, or move for taxation exemptions on the metals, although many of those efforts have failed to become law. State and federal lawmakers, including in Texas, have also been pushing to expand the viability of cryptocurrency, including with government-held reserves.

Texas’ highest-profile piece of crypto-related legislation this year, Senate Bill 21, which would create a state reserve of bitcoin and potentially other cryptocurrencies controlled by the state comptroller, is now likely to become law after formally advancing through the state legislature on Sunday. “Bitcoin doesn’t need Texas,” Brian Morgenstern, a policy adviser for the Texas Blockchain Council, the state’s leading crypto lobbying group, recently argued in an interview with The News. “Texas and the United States need bitcoin, because it’s this modern phenomenon that is an outstanding asset.” The anti-fiat movement generally argues that alternative currencies offer a hedge against inflation and a greater degree of autonomy, because standard-issue currency is theoretically vulnerable to government manipulation.

While such concerns have been lingering for decades, more recently they’ve taken on a more heated pitch. Many see an inflection point amid rising inflation, ballooning federal debt, and a US dollar that recently slid to its lowest value in three years — all of which raise questions about the currency’s central role in global finance.

‘How am I supposed to buy groceries?’ While several states have pushed for the legalisation of gold and silver, those efforts still left the metals functionally unusable, Dorazio has argued, because they didn’t include a mechanism for making purchases. “How am I supposed to go to the grocery store and buy groceries? How am I supposed to put gas in my car with a gold bar?” he said last year. “Today it’s an impossibility. You just can’t do it.” HB 1056 aims to solve that problem by enabling the state comptroller to “establish or authorise one or more electronic systems” for consumers and vendors to make and receive payments with their precious metals held in the state depository. The comptroller would also have the ability to contract the work to third parties and charge associated fees.

The current version of the bill focuses on laying the groundwork for such a system without mandating that anyone — including merchants — actually take part. But setting up a functional Texas metals transaction operation would still likely cost tens of millions of dollars and likely prove extremely logistically challenging, including by requiring potential reconfigurations of the state’s bullion depository in order to ensure the assets can be accounted for. In addition to many elected Texas Democrats and residents — some who were bewildered as the measure advanced through the legislature — fiscal watchdogs have opposed the bill because of the associated costs. Meanwhile, banking groups that include the Texas Bankers Association and Independent Bankers Association of Texas (IBAT), have raised objections over its lack of consumer protections.