Some of the early Bitcoin businesses in the US were started in Texas. The state was also among the first to have Bitcoin ATMs set up. Unlike other states that haven’t made a clear stance on cryptocurrency, Texas is putting out legislation that’s in support of crypto while striving to protect residents from energy use problems and scams.
Although Texas isn’t tough on regulating cryptocurrency, it does have some regulation. The Texas State Securities Board stopped an online platform from giving unlicensed investment opportunities in crypto in 2015. This incident was the first time that Texas took action against an unlicensed crypto investment platform. Over the years, the Texas State Securities Board has issued other cease-and-desist orders to crypto companies that are engaged in illegal activity.
The company doesn’t have to be based in Texas for the board to shut it down either. In 2017, Texas issued a cease-and-desist order to the UK-based investment company BitConnect because it was defrauding investors and functioning as a pyramid scheme. BitConnect lost millions of dollars of investment funds before it shut down its program.
In May 2021, governor Greg Abbott signed the Virtual Currency Bill. This legislation legitimizes Bitcoin and makes it easier for miners to set up in Texas. Abbott wants Texas to become the center of the Bitcoin movement.
Texas-Based Companies and Organizations
Riot Blockchain operates a blockchain mining facility in Rockdale, Texas. The building was once a steel plant. When the steel plant shut down, Rockdale lost 80% of its workforce. Riot Blockchain brought jobs back to the city and boosted the economy. It’s potentially the largest single BTC mining operation in North America.
In 2021, the Texas legislature established Texas Work Group on Blockchain Matters to strategize expansion of the blockchain industry in the state. The group also recommends blockchain-related investments to the state.
The Fort Worth city government began mining bitcoin in 2022. It is the first US city government to start mining BTC. After electricity costs were deducted, Fort Worth generated $1,019.31 over the course of a six-month pilot program. Carlo Capua, the city’s chief of strategy and innovation, explained that profit isn’t the primary goal. Fort Worth is striving to become a leader in cryptocurrency and technology. Tech companies will be more attracted to the city because it indicates that they are tech friendly and innovative. The pilot program garnered almost 753,000,000 media impressions.
Texas is a desirable state for crypto miners because electricity costs are low. The state also quickly approves the connection of mines to an electrical system. A downside of this high demand is Texas’ electrical grid isn’t ready to handle the power needs. One solution is for mining operations to decrease their power usage during periods of high demand to avoid overwhelming the power grid. From June to September in 2021, Riot Blockchain stopped mining for up to four hours 72 times.
One benefit of miners using electricity during low demand is it increases the profitability of wind and solar power. It also uses energy that would have otherwise been wasted.
According to the Texas Blockchain Council, about 27 crypto mines are currently operating in the state. More mines are being set up as well. Helios planned on setting up 50,000 servers in a 1,050-foot-long structure. This would generate approximately 1,000+ BTC per year.
ERCOT Demand Response Program
Texas has an ERCOT Demand Response Program to incentivize miners to shut down operations during periods of high demand. Miners who participate in the program can be compensated when they stop mining until demand is low enough to avoid the risk of blackouts.
During a heat wave in July 2022, 95% of large-scale miners stopped mining to prevent a blackout. Riot earned $9.5 million in energy credits by shutting off its operations during the heat wave. This is actually more than the company would have earned by continuing to mine.
Critics say that the state shouldn’t pay miners to shut off operations during periods of high demand because mining is no longer profitable during those periods anyways. They also express concerns that the grid in Texas, which is outdated, won’t be able to handle the influx of miners. Texas doesn’t have its grid connected to the rest of the US because it wants to be independent of the federal government.
Once Bitcoin reaches all-time highs again, however, it may become more profitable for miners to continue mining rather than shut down during periods of high demand. Critics are concerned that miners will continue operating until there’s a blackout. ERCOT (Electric Reliability Council of Texas) has promised that it won’t accept new miners if it would overwhelm the power grid. Some mining facilities are also bound by contract to turn off its mining until the grid is stable again.
The Texas Work Group on Blockchain Matters has a master plan for making the state a leader in blockchain technology. Energy, finance, education and government are key categories that the group addressed in its plan.
One proposal from the group is to draft a bill that requires exchanges to submit proof of their reserves to the Texas Department of Banking. They would have to make disclosures to auditors as well. The purpose of this legislation is to protect investors from a catastrophe like FTX, in which billions of customer funds were stolen.
From 2021 to 2022, it’s estimated that Bitcoin trading volume in Texas increased by 300%. According to a 2022 survey by Finder, 8% of adults in Texas owned bitcoin at the start of the year and 6% planned to adopt it. Young adults are the primary demographic who plan on adopting BTC in 2022, but the older age group were the biggest early adopters.
Eleven percent of 25–34-year-olds and 10% of 35–44-year-old respondents owned bitcoin at the time of the survey. Five percent of respondents 65+ own bitcoin and an additional 3% were expected to soon adopt it. Nine percent of 18–24-year-olds said that they would buy BTC, compared to 7% of 25-34-year-olds.
Cryptocurrency has been more popular among men and is expected to continue on that trajectory. Men in Texas are just over two times as likely to hold cryptocurrency compared to women. This gap is expected to increase because men are becoming interested at a higher rate than women.
Some businesses in Texas have started to accept bitcoin. Even local ranchers sometimes take bitcoin. Tesla, a major company that’s crypto friendly, is headquartered in Austin. The company used to accept bitcoin, but stopped because of environmental concerns over how much energy it takes to mine. Elon Musk, the CEO, has said that if Bitcoin becomes energy efficient enough, then he’ll allow it as a method of payment. Tesla does, however, accept Dogecoin as payment for certain vehicles and products.
Texas is a crypto-friendly state with a government that puts out clear legislation for the regulation of cryptocurrency. This gives both personal users and companies peace of mind that the state is adopting crypto rather than outlawing it.
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