Yesterday, Representative Jordan Pace took a significant step by reintroducing Bill H. 4256, known as the “Strategic Digital Assets Reserve Act of South Carolina,” to the South Carolina House of Representatives.
This bill brings to light several key provisions. Notably, it authorizes the State Treasurer to channel up to 10% of the state’s managed funds into digital assets such as Bitcoin. Additionally, it sets a cap on the state’s Strategic Digital Assets Reserve, allowing for the inclusion of up to one million Bitcoin.
The driving force behind establishing this reserve, as outlined in the bill, is the concern over inflation diminishing the purchasing power of assets held within state funds. Digital assets like Bitcoin, with their decentralized nature, are presented as having unique qualities that could serve as a buffer against inflation and economic instability.
One aspect the bill does not clarify is whether state officials are required to manage the private keys for the Bitcoin and other digital assets within the reserve. However, it does authorize the State Treasurer to devise strategies and policies to safeguard these assets. This includes potentially using cold storage solutions or hiring third-party services to oversee asset custody. Furthermore, third-party assistance can also be enlisted to support the establishment and management of the reserve’s security framework.
The bill mandates that the State Treasurer must prepare a report every two years, detailing the total digital assets in the reserve, their valuation in U.S. dollars, and any related transactions and expenditures since the last report. Moreover, there’s a requirement for the publication of proof of reserves. This entails listing public addresses of the digital assets on an official state website, thereby allowing citizens to conduct their audits and verify the holdings independently.
The legislation also outlines that the Strategic Digital Asset Reserve should undergo comprehensive audits. These audits would scrutinize the quality of custody security solutions, compliance with various laws, and the robustness of internal controls aimed at protecting against cyber threats and mismanagement.
As per the bill, these independent audits are expected to be carried out annually, with findings submitted to the appropriate oversight committee. Furthermore, any recommendations emerging from these audits need to be tackled within 90 days after the report is released. Subsequently, a detailed follow-up report explaining the corrective measures taken must be presented to the oversight committee.
