If you’ve paid any attention to recent developments in the financial world over the last few years, it is clear that cryptocurrencies’ influence is on the rise. While its political impact has thus far been mostly localized to discussions within the vicinities of Capitol Hill and Silicon Valley, crypto’s backers have begun an all-out national push to increase its viability as the future of finance, and nowhere has their full-throttle campaign yielded greater results than in Texas.
In response to last year’s horrific grid failure, Governor Greg Abbott has proposed a strange plan to secure Texas’s energy future by bringing more crypto mining to Texas. The idea is simple enough: encourage crypto miners to base themselves in Texas, and the amount of energy supplied to Texas’s grid will increase as a result of the greater demand for the energy needed to maintain the miners’ operations.
Based on free-market economic logic, there is a rationality to this plan. Nevertheless, a number of facts regarding the amount of energy required by crypto mining casts considerable doubt on this line of reasoning. In a January report for Bloomberg, reporter Michael Smith detailed how miners’ increased interest in Texas energy is due not only to the state’s cheap energy prices but also because previous hotspots like Iceland and China have “outright banned or limited crypto mining because of their drain on electric grids.” To that end, Abbott’s plan will lead to enough new Bitcoin mines coming online as to “require as much as 5 gigawatts of additional electricity in Texas … enough to light up Austin, a city of almost 1 million, twice over.” If Bitcoin miners don’t shut down quickly enough during a statewide shortage of power, miners could start having to “vie for power with families and businesses.”
Severin Borenstein, faculty director of the Energy Institute at UC Berkeley’s Haas School of Business, highlighted his skepticism for Abbott’s initiative in an opinion piece published recently by the Houston Chronicle. Labeling it the “Ivermectin of grid reliability,” Mr. Borenstein claimed that even if miners were able to cease operations in times of power scarcity, the idea of “adding demand that disappears when the grid capacity is strained doesn’t create much incentive to add grid capacity, and that goes double for demand from an industry whose future is highly uncertain” like cryptocurrency.
Abbott began to loudly pronounce his infatuation with crypto in a June 2021 tweet that coincided with the passage of The Texas Virtual Currency Act, which officially recognized cryptocurrency’s legal status in Texas. A few months later, Abbott hosted the Texas Blockchain Council at the Governor’s Mansion and boasted that Texas would soon “be #1 for blockchain & cryptocurrency” among US states. These tweets echoed thoughts from Senator Ted Cruz, who stated at the council’s annual summit that he would like to “see Texas become the center of the universe for Bitcoin and crypto.”
In many ways, cryptocurrency advocacy is a natural progression for Texas Republicans. Its initial proponents were libertarians and anarcho-capitalists, people who fundamentally disagree with the idea of the government regulating or participating in the economy. The anti-government ideology behind crypto is summed up best in a 2017 Atlantic article by Professor Ian Bogost, who describes Bitcoin as “a technological alternative to currency and banking that would avoid tainting the pure individualism of the anarcho-capitalist ideal.”
This makes multiple Texas Democrats’ positive positions on crypto all the more intriguing, clouding what might otherwise seem like a clearly conservative stance. One of its biggest champions has been Austin Mayor Steve Adler, who has recently pushed multiple initiatives encouraging the utilization of cryptocurrencies and blockchain technology in city transactions.
However, the most high-profile example of crypto’s growing impact on Texas progressives is this year’s Democratic primary for the 30th congressional district. Competing to fill the seat being vacated by long-time Congresswoman Eddie Bernice Johnson are State Representative Jasmine Crockett and veteran political staffer Jane Hope Hamilton. Having secured Johnson’s endorsement and nearly avoiding a runoff by obtaining 48% of the vote in the first round, Crockett is the surefire favorite to win the nomination for this deep blue seat.
That being said, the most interesting backers she has received are Protect Our Future and Web3 Forward, the crypto SuperPACs that have so far spent more than $2.3 million on behalf of her candidacy. This makes Crockett one of this election cycle’s biggest beneficiaries of special-interest support. According to Axios, crypto fund managers seem to think Crockett could help oppose the Biden administration’s efforts to increase regulation on cryptocurrencies. Crockett has claimed she has no opinion on the issue, but the sizable amount of money being spent by crypto SuperPACs belies that assertion.
As claimed by The Intercept, It is possible that this embrace of crypto money is a response by progressives who previously “had to run a gauntlet of obstacles, most of them connected to the big-money interests” in their pursuit of victory. By taking these SuperPAC dollars, Crockett is able to avoid these hurdles “by simply saying yes to the crypto agenda.”
Of course, the motivations behind these dollars could be unrelated to crypto altogether. Indeed, the Protect Our Future PAC claims its donations to Crockett are based in a concern for pandemic preparedness, which she has repeatedly substantiated her interest in during her freshman stint in the Texas Legislature. Furthermore, her views on the crypto debate may simply be more nuanced than simply left versus right.
Still, it seems the developing consensus among left-leaning figures might lead most Democrats to disagree with this opinion. In a January piece for the New York Times, Nobel Prize-winning economist Paul Krugman remarked on crypto’s “uncomfortable parallels with the subprime crisis of the 200s” in that its potential risks fall “disproportionately on people who don’t know what they are getting into and are poorly positioned to handle the downside.” While he noted that crypto has legitimate potential for “opening up investing opportunities for more diverse investors” as demonstrated by researchers’ findings that a large portion of cryptocurrency investors are nonwhite and/or without a college degree, his overall impression of crypto is a thoroughly pessimistic one, having also cited how “cryptocurrencies, with their huge price fluctuations seemingly unrelated to fundamentals, are about as risky as an asset class can get.”
Whether crypto continues to expand its influence over Texas politics remains to be seen. One thing is for certain though: it isn’t going away anytime soon.