Texas Legislature Will Consider More Incentives For Crypto Players Even After FTX Collapses

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The highly publicized collapse of FTX may have tainted cryptocurrency trading platforms, but that doesn’t slow down proponents’ plans to make Texas a leader in the ever-growing industry.

The Texas Work Group on Blockchain Matters recently released a blueprint to make the state a leader in the industry valued at around $5 billion worldwide.

The Lone Star State now ranks fourth among the best states for crypto enthusiasts, according to a 2022 Smart Asset study that considered a number of factors, including crypto-friendly legislation. Texas follows Nevada, Florida and California.

Where Texas can differentiate itself is by continuing to be a leader in cryptocurrency legislation to attract businesses deterred by regulatory uncertainty, according to the report.

The Blockchain Task Force, created by the Texas Legislature in 2021, has 16 members with representatives from state agencies, universities, and private industry. The group met monthly this year to write its 84-page report containing 21 recommendations.

The group discussed four areas related to blockchain technology: opportunities for economic growth, the current state of the industry in Texas, labor and academic needs, and legislative recommendations. Blockchain technology is the backbone of the digital world, creating a record of cryptocurrency transactions that are kept on linked computers.

One of the group, Christopher Calicott, managing partner at Austin-based Trammell Venture Partners, said when crypto goes mainstream, Texas must be ready to benefit. The size of the global blockchain technology market is expected to surpass $1.6 trillion by 2030, according to a projection by Precedence Research.

Crypto has never had a moment of mass consumer adoption like what happened with Starbucks customers using QR codes in the drive-thru, but we think it’s imminent, he said. he declares.

The blueprint for growing the blockchain industry in Texas includes sections on education, energy, finance, and government.

Recommendations include creating incentives to attract companies that don’t make money monetizing data, which falls to the industry that emphasizes privacy. The state should embrace its tradition of individual liberty by clarifying that US constitutional protections against unreasonable search and seizure extend to internet activity, the report said.

The group also suggested that miners who agree to voluntarily reduce their energy use when the state power grid is overwhelmed should not be required to pay taxes on their electric bill.

This is a small cost to ratepayers that will result in significant benefits to network reliability, the report says.

The report states that these miners help stabilize the network by absorbing stuck energy. The more miners that need to connect to the grid, the more Texas will be willing to invest in power generation assets that benefit the entire state.

During the week of July 11, when temperatures in North Texas soared above 100 degrees, 15 bitcoin miners reduced their power usage, causing 1,000 megawatts of power to go out for several hours. This equates to approximately 1.5% of the network load at peak demand.

The groups’ recommendations are a starting point. From there, state lawmakers will consider the ideas of those they want to put to a vote.

Do Crypto Players Need More Incentives?

Not all Texans think crypto companies need better treatment.

Jackie Sawicky, a self-proclaimed environmentalist, led a protest against Castle Rock, Colorado-based Riot Blockchain, which is building North America’s largest Bitcoin mining facility in Rockdale. Crypto mining is deliberately designed to waste as much energy as possible, which the state doesn’t need when it needs to ask residents to reduce their usage, she said.

Most people don’t use crypto in any way, but companies are getting very special treatment as they are pushed to the brink, she said.

Related:Sign of the times: 21-year-old teaches Dallas seniors about crypto, NFTs and selfies

This summer, electricity rates for Texans jumped more than 70%. Crypto miners use about 3,000 megawatts of power per day, or about 4% of peak demand on the hottest days, said Lee Bratcher, president of the Texas Blockchain Council. There are at least 27 mining operations in the state, but there is no way to know for certain the total number, according to the council.

Riot Blockchain site for its new Whinstone crypto-mining facility.

Sawicky pointed out that Riot Blockchain is already paid to shut down operations when the state’s power grid is overloaded. Riot said it got about $9.5 million in credits in a month this summer for shutting down during peak times. Under a voluntary power curtailment program, crypto miners can turn off their facilities and sell the electricity they don’t use back to the grid at a premium rate.

Riot also received a set of incentives from local development officials. The company has been offered a 45% reduction in local taxes for the next decade. Tax abatements and sales tax credits have allowed Riot Blockchain to hire a great team, said Chad Harris, Chief Commercial Officer of Riot Blockchain.

Rockdale City Manager Barbara Holly told the Texas Work Group on Blockchain Matters that Rockdale is on track to exceed $1 million in sales tax revenue for the first time in its history after the arrival from Riot to town.

But Sawicky argues that the negatives far outweigh the positives.

Everything is a pyramid. It is a decentralized scam a complete bubble. And a lot of them don’t have plans for rainy days, so when the economy crashes and people want their money back, they say, Oops, we spent the money, she says . There is no future in Bitcoin.

Sawicky was referring to FTX’s recent bankruptcy amid an $8 billion revenue shortfall.

Bratcher said the group is working on a bill in response to the FTX fallout that will help prevent a similar corporate meltdown in Texas. The bill would require exchanges to submit proof of their reserves to the Texas Department of Banking, as well as disclosures to an auditor. This is to prevent client funds from mixing with company funds, which FTX does.

We believe we can lead the country on this, Bratcher said.

Industry failures come from companies with inferior business models, Calicott said. They take customer assets on the platform and use them for corporate business purposes, he said.

There are many crypto companies that offer better consumer protection, he said.

What FTX is doing is a fantastic contrast to how some Texas companies actually approach Bitcoin, taking a much more tax-conservative approach, he said. We believe the regulatory backlash would be detrimental to successful Texas businesses.

Related: Crypto Is Over: FTX Collapse Impacts $78 Billion Sports Sponsorship Market

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