Texas SB 21 Is Now Law: 2025 Business & Insurance Guide
Signed on June 20 2025, the measure establishes America’s first state-managed Bitcoin reserve and requires quarterly proof-of-reserve audits for any custodian serving Texas users. Source
Why You Can Trust Hotaling’s Take on SB 21
Experience. Hotaling Insurance Services is a nationally licensed, fully independent risk-management family office with 25 years of advanced‐planning and P&C expertise serving professional athletes, ultra-affluent families, and complex businesses.
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Key Takeaways on Texas SB 21
- Effective immediately. The reserve is held at the Texas Bullion Depository.
- $500 billion market-cap floor. Right now only Bitcoin qualifies.
- Quarterly SOC-style audits. Exchanges everywhere must file if they serve Texans.
- Insurance shifts. Hartford, Chubb, Travelers, Nationwide, AIG, Cincinnati Insurance and PURE have introduced “state-reserve” sub-limits on specie and cyber programs.
What Texas SB 21 Means for 2025
The newly enacted statute authorizes the Comptroller to acquire, secure and even actively manage Bitcoin in a segregated fund. Funding sources include legislative appropriations, investment income and voluntary donations from Texas residents. An advisory committee of five oversees risk policy, but day-to-day trading authority remains with the Comptroller’s office.
Statute Overview
The law spans 38 pages. Key provisions:
- Proof-of-reserve audits every calendar quarter, aligned to SOC 1 (Type II) or ISAE 3402 standards.
- Third-party custody. Custodians must be Texas-based, maintain audited financials and carry at least $250 m in E&O coverage.
- Active management. The state may stake, lend or hedge its holdings, provided legal title never leaves the Comptroller.
- Transparency lag. Holdings must be published biennially—critics at Texas Policy Research argue for real-time dashboards.
Legislative Evolution in 2025
Texas SB 21 moved from draft to law in just over four months—a rapid clip for a bill that reshapes state treasury strategy. Filed on February 10, the measure was first heard in the Senate Finance Committee, where testimony from mining firms, the Texas Blockchain Council, and the state Comptroller highlighted Bitcoin’s potential to hedge inflation. After minor wording tweaks, it cleared the full Senate 25–5 on March 6.
In the House, the bill was routed to Appropriations. Lawmakers amended it to delete an open-ended donation clause—concerned that anonymous inflows could compromise transparency—and inserted a $500 billion 12-month average market-cap requirement, effectively limiting holdings to Bitcoin. They also tightened the audit cadence, aligning reserve attestations with the state’s fiscal quarters rather than an annual report. With those changes, the House passed the bill 101–42 on May 21.
A quick conference committee reconciled wording differences: it restored language allowing—but not requiring—staking and derivatives for risk management, while keeping the market-cap floor. Both chambers adopted the report by wide margins, and Governor Greg Abbott signed SB 21 on June 20. Because the bill contained an emergency clause, it took effect immediately, making Texas the first U.S. state with an officially sanctioned Bitcoin reserve.
Premium Modeling: Projected Rate Impact After Texas SB 21
Carrier actuaries are already pricing the statute’s quarterly proof-of-reserve audits into 2026 renewals. Expect three bands of potential movement:
| Scenario | Cyber-Crime | Specie / Vault | Blended Package* |
|---|---|---|---|
| Low (audit + multi-sig + pen-test) | +5 % | +4 % | -8 % credit |
| Mid (audit only) | +10 % | +8 % | -4 % credit |
| High (no audit; hot-wallet > 20 %) | +15 % | +12 % | 0 % credit |
*Blending cyber and specie with one carrier can still unlock up to 12 % in package credits when controls meet insurer benchmarks.
Underwriting Data Requirements Checklist
To secure the best rates post-SB 21, carriers will now request:
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Latest SOC 1 Type II or ISAE 3402 report (covering key-management controls).
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Chain-of-custody logs showing every key-signing event for the past 90 days.
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Results of the most recent penetration test and any remediation evidence.
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Minutes from the board’s Digital-Asset Committee (quarterly cadence).
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Geo-distribution of cold-storage sites—especially amounts held within 25 mi of Austin.
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Confirmation that private keys are backed by multi-sig (3-of-5) hardware devices stored in distinct physical vaults.
Claims Scenarios: How Policies Respond
Scenario 1 – Hot-Wallet Key Compromise
A rogue employee exports an unencrypted key, siphoning 50 BTC.
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Cyber-Crime: Pays on “Computer Fraud / Funds Transfer” trigger, less deductible.
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Specie: No response—loss occurred outside insured vault.
Scenario 2 – Physical Vault Breach
Armed robbery at a cold-storage facility holding 120 BTC.
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Specie: Responds under “Theft of Tangible Digital Asset Media,” subject to new state-reserve sub-limit of $100 m.
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Cyber-Crime: Only responds if the policy includes “Loss of Key Material”; otherwise excluded.
Takeaway: Review both forms to ensure “loss of key material” and “theft” triggers are present and harmonized, especially for assets stored within Texas’s new reserve framework.
Compliance Checklist for Businesses
- Map Texas nexus—track user IPs and in-state revenue.
- Adopt multi-sig wallets and immutable log exports before the first audit window.
- Align cyber-crime renewal dates with the statute’s quarterly attestations—see our Digital-Asset Insurance Guide.
- Charter a board-level Digital-Asset Committee with quarterly sessions.
- Draft 8-K or 6-K templates for any treasury allocations to the reserve.
Insurance Impact
| Line | 2025 Trend | Effect of the Law | Hotaling Carriers |
|---|---|---|---|
| Cyber-Crime | Premiums +18 % | +5–10 % if no SOC audit | Travelers · Chubb · Nationwide |
| Specie / Vault | Capacity tight | “State-reserve” sub-limits on large vaults | AIG · Cincinnati · PURE |
| D&O | Flat | Higher retentions for boards without a crypto committee | Hartford · Chubb |
Tip — Bundling specie and cyber cover with one carrier can save 8–12 %.
Further Reading
- Official Texas Legislature page
- Dallas Fed research on Bitcoin volatility
- Texas Policy Research transparency critique
For personalized guidance, talk to our Crypto Risk Advisors or explore Digital-Asset Insurance solutions.
Texas SB 21 FAQs
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Does the statute cover assets other than Bitcoin?
- No. Only cryptocurrencies whose 12-month average market cap exceeds $500 billion qualify—currently just Bitcoin.
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Is there a grandfather clause for existing exchanges?
- No. All custodians serving Texas users must comply immediately.
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How often must Texas publish reserve data?
- Every two years, though some watchdogs advocate quarterly dashboards.
Conclusion
The new reserve law turns digital assets into an official treasury tool and sets a higher bar for proof-of-reserve standards nationwide. Early alignment can unlock insurance credits and tax efficiencies; laggards may face premium surcharges and audit friction.