Pennsylvania: proposed law to adopt Bitcoin as a reserve

In Pennsylvania è stata proposta una legge che renderebbe legale per lo Stato adottare Bitcoin come riserva.

The proposal was put forward by the Republican representative Mike Cabell of the State House of Representatives, and its purpose would be to defend against inflation.

Pennsylvania: the bill to use Bitcoin as a State reserve

In the official memo Cabell reveals that the bill would allow the Pennsylvania State Treasurer to invest up to 10% of the funds in Bitcoin.

For now, however, it is only a bill, and since it has not yet been approved, it has not yet come into effect. Furthermore, the law would allow Pennsylvania to invest in Bitcoin, but it would not obligate it.

If approved, the State General Fund, the Rainy Day Fund, and the State Investment Fund would have the opportunity to invest 10% of their funds in Bitcoin. 

Note that the Treasury of the State of Pennsylvania has more than 9.7 billion dollars in its General Fund, and about 7 billion in its Rainy Day Fund, so in total they could invest in Bitcoin more than one and a half billion dollars. 

The idea of Cabell 

Cabell cited BlackRock and Fidelity as references, which have turned to BTC to protect their portfolios from economic volatility. 

Note that at this moment Pennsylvania is governed by the Democrats, who also have the majority in its Parliament. However, the Democratic majority is very slim, and in the presidential elections on November 5, the Republicans won. 

Probably right after the victory on November 5, Cabell decided to introduce a similar law, now that the wind seems to have changed. 

However, given that the majority in Pennsylvania is still democratic, his bill will easily be obstructed and might not be approved. 

Cabell was inspired by the framework proposed by the Satoshi Action Fund, a Bitcoin advocacy group, whose representative Aaron Kaufer co-sponsored the bill. However, this will hardly help during the approval process. 

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The precedent

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However, there is a precedent that gives this bill a bit more of a chance. 

This is the law approved in October by the Pennsylvania House (the Strategic Bitcoin Reserve HB 2664) which establishes a regulatory framework for the protection of self-custody and cryptocurrency payments. 

Furthermore, there is also a precedent at the national level. 

After Trump’s victory in the presidential elections on November 5, Republican Senator Cynthia Lummis proposed a national law to establish a strategic reserve in Bitcoin for the United States of America. 

The fact is that, on a national level, not only have the Republicans gained the majority in Parliament in the recent elections, but the government starting from January 20, 2025, will be presided over by Trump, who had already expressed support for a similar initiative during the election campaign. 

So even if Cabell’s bill proposal does not get approved in Pennsylvania, there is always the possibility that it will be approved later on, also due to the increase in the political strength of the republicans compared to the democrats. 

Bitcoin as a reserve beyond the State of Pennsylvania: in El Salvador, the law is already a reality

To tell the truth, there is already a State that is building reserves in Bitcoin. 

It is not a US State, but a Central American one, El Salvador, where Bitcoin is legal tender.

El Salvador, in fact, for at least a couple of years has initiated a BTC purchase program that has led it over time to accumulate almost 6,000 BTC. At the current market value, this amounts to 520 million dollars, equivalent to 2% of its GDP. 

The concept, followed by both companies and individuals, is to accumulate BTC over time with many purchases spread over the years, in order to build a monetary reserve in Bitcoin to use when needed. 

It is something very similar to what has always been done with gold, but with some significant differences. 

The first important difference is that gold is a risk-off investment, therefore excellent especially during times of global financial difficulty, while Bitcoin remains risk-on. This can guarantee higher returns for investments in BTC on one hand, but on the other hand, it also significantly increases the risks, especially in case of problems. 

The second is that Bitcoin can be spent much more easily and quickly, even directly, while to spend gold it is necessary to actually convert it into fiat currency. In case of problems, if on one hand the value of Bitcoin could decrease, on the other hand the BTC would always remain easily spendable.