In my latest Texas Monthly column, I take a look at the state’s hottest new cottage industry: Bitcoins. The virtual currency took the online world by storm a few years ago, and while it still has plenty of skeptics, Texas has become one of the leaders in developing rules and applications for virtual currency.
Texas,” says Jeremy Kandah, “is the most Bitcoin-friendly state in the union.” Kandah, a member of the Austin venture capital group Bit-Angels Network, has his reasons for asserting that the Lone Star State is bullish on the headline-making virtual currency. BitAngels, after all, is in the business of convincing Bitcoin-related start-ups that Texas is where they should be turning for capital. But once you start paying attention, you notice that Kandah’s enthusiasm is more than just your typical chamber-of-commerce boosterism. Texas dwarfs even Silicon Valley as a Bitcoin pioneer, which is one reason Kandah, like many others who want a piece of tech’s new big thing, recently moved here from California. “We have one of the biggest concentrations in the country of Bitcoin users and Bitcoin technology companies,” says David Johnston, the managing director of BitAngels’ sister company, the Decentralized Applications Fund.
Though Kandah notes that New Jersey is gaining on us, there are plenty of signs of Bitcoin’s unusually heavy presence in Texas. In April the state’s Department of Banking became the first state regulator in the country to issue guidelines for virtual currencies. That same month Steve Stockman, the Republican congressman from Clear Lake who was one of the first politicians in the country to accept Bitcoin donations, introduced a bill that would require the Internal Revenue Service to treat Bitcoins like any other currency. Even the Second Amendment contingent is getting in on the game: in January Austin’s Central Texas Gunworks began accepting payment in Bitcoins, making it the first firearms shop in the country to do so. A month later, after the Texas Alcoholic Beverage Commission approved the use of Bitcoins to buy booze, downtown Austin beer and cocktail joint the HandleBar installed the country’s first Bitcoin ATM.
Why is Texas so attached to Bitcoin? Our hands-off regulatory philosophy, which could encourage entrepreneurs to take a chance on a virtual currency, likely has something to do with it. And there’s no doubt that the state’s libertarian leanings play a role; embracing Bitcoin is the ultimate statement of disdain for the Federal Reserve, the bête noire of Texas’s Libertarian party standard-bearer Ron Paul. As Stockman said in an online video, “Digital currency’s more about freedom. . . . Freedom to choose what you do with your money and freedom to keep your money without people influencing it by printing money or through regulation.” Texas Bitcoin Association president Paul Snow likes to throw around libertarian boilerplate phrases like “the crumbling, diminishing dollar.”