Texas urged to become hub for cryptocurrency and other blockchain tech
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While many people still lack a true grasp of the emerging technology known as blockchain, Texas is positioning itself to help foster the small industry that’s growing up around it.
Blockchain is a part of emerging technology related to Web3, or what some technologists consider the next iteration of the internet. A blockchain is a form of distributed database that stores data in chronological groups called blocks. Individual blocks can be added to the chains, but they can’t be edited or removed. One of blockchain’s best-known uses is its role in cryptocurrency.
Now, a group of industry leaders working to help Texas become a center of activity for blockchain and related technologies, including cryptocurrency, has come out with its first set of recommendations for the state.
The group — called the Texas Workgroup on Blockchain Matters and comprised of about a dozen members from state agencies, Texas universities and the blockchain industry — outlined more than 20 measures aimed at strengthening the growing blockchain industry here.
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Christopher Calicott, managing director of Trammell Venture Partners, an Austin-based early-stage venture capital firm, is part of the group, which was established during the 2021 session of the state Legislature to help Texas take a strategic approach to the industry.
Calicott said the group’s recent report containing its recommendations should help clarify to policymakers how the technology and industry work, potentially leading to new legislation that could aid the emerging blockchain industry.
“I hope that this report is going to help to shine a light on things that we identified as key,” he said. “The report is really the first step and invites a great sharing of ideas.”
The report includes recommendations for how the state should use the technology for commercial contracts, digital identity, privacy and education. It also has ideas for regulating blockchain-related businesses such as DAOs — or Decentralized Autonomous Organizations, which are internet-native organizations that are owned and managed by their members and have no central leadership.
The Lone Star State is already home to a significant amount of blockchain activity, including cryptocurrency mining, even though many people in the state are still unfamiliar with how the technology or industry work. For those in the industry, however, Texas is becoming a key place to consider setting up shop, Calicott said, especially after China banned bitcoin mining.
“It’s still quite early days (but) it’s definitely growing,” Calicott said. “If you’re a serious business player and you’re anywhere else and you’re thinking about participating in, for example, securing the bitcoin network, you’re definitely considering what the options might be in Texas.”
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Calicott said the industry is growing both in tech-friendly cities like Austin and in rural Texas.
“The (cryptocurrency) miners started figuring out that Texas was a stable, favorable regulatory environment, and start-ups also increased their interest in relocating here or forming new companies here,” he said. “It will ultimately create an abundance of all kinds of different jobs in different places.”
The workgroup is hoping bitcoin and blockchain remain on the minds of state lawmakers as the new legislative session starts. But emerging technology requires a lot of education, Calicott said, so members of the group will be making themselves available to policymakers as the legislative session gets going in hopes that some of its recommendations are adopted.
“Texas is very uniquely positioned,” he said, noting that the state has been encouraging companies to set up here while others have been pushing some of the activity out.
In addition, the state’s already large technology industry is helping to attract blockchain-related companies and talent. Its energy assets also are attracting bitcoin mining.
“We’re going to continue to have an outsized opportunity (in Texas), at least on the energy and mining end of the spectrum,” Calicott said. “And because of all the start-up activity in Texas, other companies as well are going to be domiciling here.”
Texas politicians have previously expressed their support for cryptocurrency and blockchain, including Gov. Greg Abbott, who said last summer that “Texas is open for crypto business.” Texas Sen. Ted Cruz, an investor in bitcoin, the first and highest-profile cryptocurrency, also has advocated for digital currencies.
Last year, after Abbott hosted the Texas Blockchain Council at the governor’s mansion, Abbott predicted that Texas “soon we will be #1 for blockchain & cryptocurrency.” The Texas Blockchain Council is an industry advocacy group.
More:City, business leaders aim to make Austin a hub for cryptocurrency, Web3, blockchain
Supporters of crypto mining have contended that the industry can help stabilize the state’s electricity grid, since the industry is power intensive and its appetite for electricity could spur investment in new generation. In times of high overall electricity demand and strain on the grid, they have said crypto miners can throttle back their own usage to make more power available statewide.
But some experts fear the expansion of crypto mining in Texas could have the opposite effect on the grid.
The recent report from the blockchain working group contained a number of energy-related recommendations, including a proposal to create a tax abatement to spur investment in power plants fueled by natural gas. It also said the state should use tax incentives to attract big electricity users like bitcoin miners that can vary the timing of their demand, if they agree to voluntarily cut their power consumption when needed.
In addition to state government, the city of Austin also has had an interest in emerging blockchain-related technologies.
In March, city officials and local business leaders announced a number of initiatives aimed at making Central Texas a leader in the space. Since then, however, a city-commissioned report on potential applications in municipal government advised city departments to move cautiously when using the new technology, making it unlikely Austin residents will be paying their utility bills with crypto anytime soon.
Meanwhile, the timing of the report by the state’s blockchain workgroup has corresponded to renewed turbulence for cryptocurrencies and related industries. A number of major cryptocurrencies have crashed in value in recent weeks, and one of the largest crypto exchanges, FTX, collapsed and filed for bankruptcy.
But even amid the disruptions, Calicott said his firm is still investing in the industry in Texas and a number of Texas-based blockchain startups are operating full-steam ahead.
“Some of the real differentiated work is actually happening here in Texas,” he said. “Maybe the rest of the world thinks that’s a surprise, but for a native Texan it’s completely unsurprising to me. That’s why we’re making some important bets here in Texas.”
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