Yesterday, Rep. Jordan Pace reintroduced Bill H. 4256, The “Strategic Digital Assets Reserve Act Of South Carolina”, into South Carolina’s House of Representatives.
Highlights from the bill include the fact that it enables the State Treasurer to invest up to 10% of the funds under the state’s management into digital assets, including bitcoin, and that the state’s Strategic Digital Assets Reserve can include up to one million bitcoin.
The bill also states that the reason for establishing such a reserve is because “inflation has eroded the purchasing power of assets held in state funds” and that “bitcoin, a decentralized digital asset, and other digital assets offer unique properties that can act as a hedge against inflation and economic volatility.”
The bill does not stipulate whether or not state officials should hold the private keys to the bitcoin and other digital assets that it accumulates for the reserve, though it enables the State Treasurer to develop policies and protocols to protect the assets held in the reserve, including the use of cold storage or the contracting of a third party to maintain custody of the assets. The State Treasurer can also utilize a third party to assist in the creation, maintenance, and administration of the reserve’s security.
As per the bill, the State Treasurer would be responsible for preparing a biennial report that includes the total amount of digital assets held in the reserve, the U.S. dollar value of those assets, and transactions and expenditures related to the reserve since the previous report. Also, the State Treasurer would be required to publish proof of reserves, which includes the public addresses of the digital assets held in the reserve on an official state website, enabling citizens to independently audit and verify the reserve’s holdings.
Finally, the bill stipulates that the Strategic Digital Asset Reserve undergo audits that include an examination of the quality of the security of custody solutions; an assessment of compliance with local, state and federal laws; and an evaluation of internal controls to mitigate against cyberattacks and mismanagement.
According to the bill, the independent audits should be conducted annually and submitted to the relevant oversight committee. Any recommendations resulting from the independent audits must be addressed within 90 days of the issuance of the report, and a follow-up reporting detailing the corrective actions taken must also be provided to the oversight committee.