Crypto could be used to raise state financing according to a Colorado bill making its way through congress.
Cover art/illustration via CryptoSlate
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 ;
- Allow all investors, including retail, to invest
- Reduce State’s reliance on commercial banks
- 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.”