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How Florida Can Launch a Bitcoin Strategic Reserve

Florida has been a trailblazer in adopting innovative financial policies, from banning central bank digital currencies (CBDCs) to championing blockchain technology. With leaders like House Speaker Danny Perez and Senate President Ben Albritton showing pro-Bitcoin stances, the Sunshine State is well-positioned to take a revolutionary step forward: establishing a Bitcoin Strategic Reserve. Here’s how such a reserve could work and why it would be a game-changer for Florida’s financial future.

What Is a Bitcoin Strategic Reserve?

A Bitcoin Strategic Reserve is a state-managed fund that holds Bitcoin as an asset, much like how countries and institutions maintain reserves in gold or foreign currencies. Bitcoin’s decentralized and finite nature—capped at 21 million coins—makes it an attractive hedge against inflation and economic uncertainty.

Globally, entities such as El Salvador have already embraced Bitcoin as part of their national reserves, leveraging the cryptocurrency's growth potential and its role as a digital store of value. By creating its own Bitcoin Strategic Reserve, Florida could establish itself as a leader in modern financial governance.

How Florida Can Benefit from a Bitcoin Reserve

1. Hedge Against Inflation:
   Bitcoin’s scarcity and independence from traditional monetary systems make it an ideal inflation hedge. Adding Bitcoin to its reserves could protect Florida’s economy from the effects of a devaluing dollar or federal monetary policy shifts.

2. Boost Economic Innovation:
   A Bitcoin reserve would align with Florida’s growing reputation as a hub for tech and crypto innovation. It would attract blockchain companies, startups, and investors, creating jobs and economic opportunities.

3. Financial Sovereignty:
   Bitcoin reserves would offer Florida a measure of financial autonomy. As states increasingly question federal overreach, holding Bitcoin could bolster Florida’s position as a financially independent entity.

4. Surplus Utilization:
   Florida’s robust budget surplus offers an opportunity to allocate funds into long-term investments like Bitcoin without compromising other essential state functions.

Pro-Bitcoin Leadership in Florida

House Speaker Danny Perez and Senate President Ben Albritton have demonstrated clear support for Bitcoin and opposition to CBDCs. Both leaders voted to ban CBDCs in Florida, citing concerns about government overreach and surveillance. Their forward-thinking approach positions Florida as a state willing to explore decentralized technologies for public benefit.

Perez’s emphasis on responsible budgeting aligns seamlessly with the concept of a Bitcoin reserve, as it presents an opportunity to responsibly invest excess funds. Albritton’s leadership in financial policy would be instrumental in guiding legislative support for such an initiative.

Leveraging Florida’s Pension Fund for a Bitcoin Reserve

The Florida Retirement System (FRS) Pension Fund represents a prime opportunity for funding a Bitcoin Strategic Reserve. As of June 30, 2023, the FRS Pension Fund had an unaudited market value of $185.7 billion in assets, an increase of over $5 billion from the previous year.

Key facts about the FRS:

• The FRS is the fourth-largest state retirement system in the U.S., serving over 1.2 million active, retired, and terminated vested members.

• In 2023, the FRS achieved an investment gain of 7.5%, a significant improvement from a negative return of 6.27% in 2022.

• As of July 2023, the FRS’s funding ratio was 81.4%, with approximately $38 billion in unfunded liabilities.

• The FRS plans to sell up to $4 billion in private credit stakes to rebalance its portfolio.

The State Board of Administration (SBA), established by the Florida Constitution, is the principal independent investment management organization responsible for overseeing FRS funds. The SBA also manages the Florida Hurricane Catastrophe Fund, Florida PRIME, and more than 25 other funds directed by the Florida Legislature.

Governed by a three-member Board of Trustees—comprising the Governor, the Chief Financial Officer, and the Attorney General—the SBA operates with significant legislative oversight. The Trustees delegate authority to the SBA’s Executive Director and Chief Investment Officer (CIO), who manages approximately 200 investment and administrative staff.

Allocating a small percentage of the FRS's $185.7 billion assets to Bitcoin could position Florida as a leader in pension fund innovation while diversifying the portfolio with a high-growth potential asset.

Funding the Bitcoin Strategic Reserve Through Surplus and Budget Allocations

Florida’s $116.5 billion budget for FY 2024-25 includes a healthy surplus. Redirecting even a modest 1% of the surplus into Bitcoin reserves could yield significant long-term returns, given Bitcoin’s historical growth trajectory.

In addition to the surplus, Florida could use proceeds from FRS portfolio adjustments, such as the planned sale of private credit stakes, to fund the reserve. These moves would reflect strategic diversification while ensuring prudent management of taxpayer and pension fund dollars.

Building the Reserve: Steps to Take

1. Legislative Approval:
   Perez and Albritton could lead efforts to draft legislation authorizing the creation of the Bitcoin Strategic Reserve, ensuring robust governance and transparency.

2. Partnerships with Bitcoin Custodians:
   The state could collaborate with established custodians to securely store its Bitcoin holdings, minimizing risks associated with digital asset management.

3. Educating Policymakers and the Public:
   A successful Bitcoin reserve initiative requires widespread support. Policymakers and the public must understand the benefits and long-term vision of incorporating Bitcoin into Florida’s financial strategy.

Conclusion

Florida has already proven itself as a leader in financial innovation and decentralization. Establishing a Bitcoin Strategic Reserve would not only solidify its reputation but also provide tangible economic and financial benefits. Leveraging resources like the FRS Pension Fund and the state’s budget surplus, while supported by pro-Bitcoin leaders like Danny Perez and Ben Albritton, Florida is uniquely positioned to set a precedent for state-level financial innovation.

With the robust oversight and expertise of the SBA, Florida can manage such a reserve effectively, safeguarding taxpayer dollars while investing in the state’s financial future. By taking this bold step, Florida would reaffirm its commitment to economic freedom, innovation, and responsible governance, setting a roadmap for other states to follow in the era of digital finance.

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