In South Carolina news yesterday, Representative Jordan Pace reintroduced Bill H. 4256, officially titled the “Strategic Digital Assets Reserve Act Of South Carolina,” to the state’s House of Representatives.

One of the most interesting parts of Bill H. 4256 is that it would allow the State Treasurer to invest up to 10% of the funds the state manages into digital assets, including, notably, bitcoin. It also proposes that South Carolina’s Strategic Digital Assets Reserve could hold as much as one million bitcoin.

The bill explains that the reason behind establishing this reserve is because “inflation has eroded the purchasing power of assets held in state funds.” It further argues that “bitcoin, a decentralized digital asset, and other digital assets offer unique properties that can act as a hedge against inflation and economic volatility.”

It’s worth noting that the bill doesn’t specifically say if state officials would need to hold the private keys for the bitcoin and other digital assets in the reserve. However, it does empower the State Treasurer to create policies and procedures to safeguard these assets. This could include using things like cold storage or even hiring a third-party company to handle custody. The State Treasurer is also authorized to bring in external help for setting up, maintaining, and securing the reserve.

For accountability, the bill states that the State Treasurer would be responsible for putting together a report every two years. This report would detail the total amount of digital assets in the reserve, their U.S. dollar value, and all transactions and expenses related to the reserve since the last report. Transparency is also addressed: the State Treasurer would have to publish “proof of reserves”—meaning the public addresses of the digital assets—right on an official state website, allowing citizens to independently check and verify the reserve’s holdings themselves.

To ensure proper oversight, the bill also mandates that the Strategic Digital Asset Reserve undergo regular audits. These audits would examine the quality of security for custody solutions, check for compliance with all applicable laws (local, state, and federal), and evaluate the internal controls in place to protect against cyberattacks and any mismanagement.

According to the proposed legislation, these independent audits should be done every year and then submitted to the relevant oversight committee. Importantly, any recommendations that come out of these audits must be addressed within 90 days of the report being issued. What’s more, a follow-up report detailing exactly what corrective actions were taken must also be provided to the oversight committee.