The gold standard may be back from the dead. Texas lawmakers want to combine the long-deceased monetary system with new technologies and reinstate commodity-backed money as a digital currency. Two identical bills laying out this bold vision were introduced in the Texas House of Representatives and Texas Senate on 10 March by, respectively, Senator Bryan Hughes and Representative Mark Dorazio.
In the subchapter concerning the establishment and administration of the digital gold currency, the bill reads as follows: "The comptroller shall establish a digital currency that is backed by gold so that each unit of the digital currency issued represents a particular fraction of a troy ounce of gold held in trust as provided by this chapter." Further on, the draft stipulates that the comptroller establishes a means to ensure that a digital currency holder easily transfers the currency "to any other person by electronic means."
The comptroller, who acts as a trustee, is bound to "maintain enough gold to provide for the redemption in gold of all units of the digital currency that have been issued and are not yet redeemed for money or gold." This paragraph, which virtually excludes the fractional reserve mechanism, should sound like music to the ears of anyone (except direct beneficiaries of the system) roughly aware of how the dollar issuance process works, with banks creating money nearly (but not completely) out of thin air.
In a gold standard, a country's currency is linked to gold, although the type and scope of this relation may vary. Such a system was functioning from the 1870s to 1971 with short gaps. Throughout this time, it evolved, or rather devolved, to a washed-down form with the safeguards against no-holds-barred money creation being gradually taken down, which massively contributed to nearly (?) all the financial crises of the last decades.
The analogous gold standard may apply to a currency issued by other political entities, such as a state or a city. For example, in 2021, Miami launched a digital currency named MiamiCoin to help the city develop its tech ecosystem. Recently, though, the coin – along with a similar New York-related municipal currency NYCcoin – has suffered a period of exceptionally low liquidity and was suspended by OKCoin, the only platform that offered both assets.
The future of Texas' bills remains unclear. Neither of the two has been passed or presented for a vote.