SB 178: State Depository Board; allow the state treasurer to invest in Bitcoin; provide

Senate Bill 178

By: Senators Dolezal of the 27th, Beach of the 21st and Dixon of the 45th

A BILL TO BE ENTITLED

AN ACT

To amend Article 3 of Chapter 17 of Title 50 of the Official Code of Georgia Annotated, relating to state depositories, so as to provide for the State Depository Board to allow the state treasurer to invest in Bitcoin; to provide for a limit on such investment; to provide for requirements for the safe handling of such assets; to provide for the loaning of such assets; to provide for definitions; to provide for related matters; to repeal conflicting laws; and for other purposes.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:

SECTION 1.

Article 3 of Chapter 17 of Title 50 of the Official Code of Georgia Annotated, relating to state depositories, is amended by revising subsection (b) of Code Section 50-17-63, relating to deposit of demand funds, investment of funds, reports, remittance of interest earned, motor fuel tax revenues, as follows:

"(b) All departments, boards, bureaus, and other agencies of the state shall report to the board, on such forms and at such times as the board may prescribe, such information as the board may reasonably require concerning deposits and withdrawals pursuant to this Code section and shall enable the board to determine compliance with this Code section. Interest earned on state funds withdrawn from the state treasury on approved budgets shall be remitted to the Office of the State Treasurer by each department, board, bureau, or agency and placed in the general fund. The board may permit the state treasurer to invest in any one or more of the following: bankers' acceptances; commercial paper; bonds, bills, certificates of indebtedness, notes, or other obligations of the United States and its subsidiary corporations and instrumentalities or entities sanctioned or authorized by the United States government including, but not limited to, obligations or securities issued or guaranteed by Banks for Cooperatives regulated by the Farm Credit Administration, the Commodity Credit Corporation, Farm Credit Banks regulated by the Farm Credit Administration, Federal Assets Financing Trusts, the Federal Financing Bank, Federal Home Loan Banks, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the Financial Assistance Corporation chartered by the Farm Credit Administration, the Government National Mortgage Association, the Import-Export Bank, Production Credit Associations regulated by the Farm Credit Administration, the Resolution Trust Corporation, and the Tennessee Valley Authority; obligations of corporations organized under the laws of this state or any other state but only if the corporation has a market capitalization equivalent to $100 million; provided, however, that such obligation shall be listed as investment grade by a nationally recognized rating agency; the shares of any mutual fund the investments of which are limited to securities of the type described in this subsection and distributions from which are treated for federal income tax purposes in the same manner as the interest on said obligations, provided that at the time of investment such obligations, or the obligations held by any such unit investment trust or the obligations held or to be acquired by any such mutual fund, are limited to obligations which are rated within one of the top two rating categories of any nationally recognized rating service or any rating service recognized by the commissioner of banking and finance, and no others, or to securities lending transactions involving securities of the type described in this subsection; bonds, notes, warrants, and other securities not in default which are the direct obligations of the government of any foreign country which the International Monetary Fund lists as an industrialized country and for which the full faith and credit of such government has been pledged for the payment of principal and interest, provided that such securities are listed as investment grade by a nationally recognized rating agency; Bitcoin, as such term is defined in Code Section 50-17-68; or obligations issued, assumed, or guaranteed by the International Bank for Reconstruction and Development or the International Financial Corporation, provided that such securities are listed as investment grade by a nationally recognized rating agency; provided, however, that interest earned on the investment of motor fuel tax revenues shall be defined as motor fuel tax revenues and shall be appropriated in conformity with and pursuant to Article III, Section IX, Paragraph VI(b) of the Constitution of Georgia. The board may also permit the state treasurer to lend any of the securities of the type identified in this subsection subject to the limitations of subsection (b) of Code Section 50-5A-7 and this chapter."

SECTION 2.

Said article is further amended by adding a new Code section to read as follows:

"50-17-68.

(a) As used in this Code section, the term:

(1) 'Bitcoin' means the decentralized digital currency hosted on the public blockchain by the same name.

(2) 'Exchange traded product' means any financial instrument that is approved by the Securities and Exchange Commission or the Commodity Futures Trading Commission that is traded on a federally regulated exchange and derives its value from an underlying pool of assets, such as stocks, bonds, commodities, or indexes.

(3) 'Private key' means a unique element of cryptographic data used for signing transactions on a blockchain.

(4) 'Qualified custodian' means any federal or state chartered bank, trust company, or special purpose depository institution or a company regulated by the state which holds digital assets for an approved exchange traded product.

(5) 'Secure custody solution' means a technological product or blended product and service which has all of the following characteristics:

(A) The private keys that secure digital assets are exclusively known by and accessible by the government entity;

(B) The private keys that secure digital assets are exclusively contained within an encrypted environment and accessible only via end-to-end encrypted channels;

(C) The private keys that secure digital assets are never contained in, accessible by, or controllable via a smartphone;

(D) Any hardware that contains the private keys that secure digital assets is maintained in at least two geographically diversified secure data centers;

(E) The secure custody solution enforces a multiparty governance structure for authorizing transactions, enforces user access controls, and logs all user initiated actions;

(F) The provider of the secure custody solution has implemented a disaster recovery protocol that ensures customer access to assets in the event the provider becomes unavailable; and

(G) The secure custody solution undergoes regular code audits and penetration testing from audit firms.

(b) The board shall not permit the state treasurer to invest more than 5 percent of any fund into Bitcoin.

(c) Any digital assets acquired pursuant to this chapter shall be held:

(1) Directly through the use of a secure custody solution;

(2) On behalf of the state by a qualified custodian; or

(3) In the form of an exchange traded product issued by a registered investment company.

(d) The board may permit the state treasurer to loan digital assets, so long as such loan does not increase the financial risk to the state."

SECTION 3.

All laws and parts of laws in conflict with this Act are repealed.