Colorado Senate Committee considers using crypto to raise state capital

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Col­orado sen­a­tors are con­sid­er­ing a bill “to study the fea­si­bil­i­ty of using secu­ri­ty token offer­ings for state cap­i­tal financ­ing” enti­tled “Secu­ri­ty Token Offer­ings State Cap­i­tal Financing.”

A secu­ri­ty token offer­ing cre­ates frac­tion­al tokens of an under­ly­ing asset with­out sell­ing the asset direct­ly. The bill looks to explore a new method of state cap­i­tal financ­ing, as not­ed below.

“Con­cern­ing state cap­i­tal financ­ing man­aged by the state trea­sur­er, and, in con­nec­tion there­with, expand­ing the types of col­lat­er­al that can be used to secure such financ­ing and mak­ing an appropriation.”

State financ­ing tra­di­tion­al­ly comes through income tax­es, sales tax­es, and fed­er­al trans­fers. While tokens such as Miami­Coin have attempt­ed to cre­ate new income streams to invest in local projects, they are not offi­cial­ly backed by local government.

Col­orado could be the first state to turn to cryp­to to increase its fund­ing options to rein­vest into infra­struc­ture and services.

The Col­orado State Trea­sur­er has until March 2023 to present its find­ings and rec­om­men­da­tions. A pos­i­tive assess­ment could stim­u­late future leg­is­la­tion to pro­pose the direct use of Secu­ri­ty Tokens for rais­ing state capital.

The bill also sets out guide­lines for what will hap­pen if the bill pass­es. Secu­ri­ty Tokens, accord­ing to the bill, will ;

  1. Allow all investors, includ­ing retail, to invest
  2. Reduce State’s reliance on com­mer­cial banks
  3. Reduc­tion in over­all state costs

Almost $500 mil­lion has been assigned to the fea­si­bil­i­ty study.  This war chest will allow Col­orado to dive into Secu­ri­ty Tokens to review their poten­tial val­ue thor­ough­ly.  As the amend­ments to the bill have been passed, it will now be tak­en back to the sen­ate to rat­i­fy it into law.

The last vote went 6 to 3, with all “nay” com­ing votes com­ing from Repub­li­cans. The amend­ments focused on some improve­ments to the  tech­ni­cal lan­guage and broad­ened the def­i­n­i­tion of “eli­gi­ble state facility.”

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