For better or worse, every Texan owns a smidgen of the popular cryptocurrency bitcoin. Lawmakers from both parties voted to create a Texas Strategic Bitcoin Reserve during the regular Legislature, which Gov. Greg Abbott happily signed into law in June. The state comptroller’s office, which oversees the fund, recently contracted to purchase the fund’s first assets, $5 million of bitcoin.

This newspaper has argued against establishing a public cryptocurrency stockpile for a range of reasons. Our concerns remain relevant.

Cryptocurrency is extraordinarily volatile, and bitcoin’s recent history underscores that. Bitcoin had reached about $126,000 per unit in early October. When the market closed on Dec. 1, its value had dropped to $86,321. Ouch.

The blockchain technology behind cryptocurrencies is, in theory, extremely secure. Nevertheless, scammers easily exploit regulatory weaknesses, investors’ naivete and crypto’s anonymity and decentralized nature.

Last month, Europol announced it had broken up a multinational cryptocurrency fraud and money laundering ring. The New York Times reported in November that crypto exchanges, such as Binance, have attracted billions of dollars from drug cartels and terrorist groups. (In 2023, Changpeng Zhao, Binance’s former CEO, pleaded guilty to operating without basic safeguards against money laundering. He was recently pardoned by President Donald Trump.)

And cryptocurrency mining’s need for immense amounts of water and electricity can become a source of conflict in local communities, including in Texas.

Given those caveats, we understand that digital currencies are starting to mature and that individual and institutional investors have become more comfortable with them. Public funds managers do have a responsibility to try to safely grow those dollars through careful investments. For example, just keeping up with the past year’s inflation requires an investment return of about 3%.

The National Conference of State Legislatures tallied 40 states that considered bills related to digital currencies or assets this year. Texas is the first to buy a digital currency for a public reserve; lawmakers allocated $10 million that could be used to purchase assets for the fund.

Texas may have been lucky with the timing of its purchase. As business reporter Trevor Bach wrote in this paper Tuesday, bitcoin was trading at about $87,000 when the state apparently bought its stash. While it’s usually foolish to try to time the market, better for Texas to have invested at that price than when bitcoin was at its peak of $126,000.

Five million dollars is a tiny percentage of the state’s $338 billion budget, but it’s still $5 million we can’t afford to lose. If the bitcoin investment makes money, the comptroller should sweep those earnings into a less risky asset rather than letting them ride.

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