Testifying Before the Texas Senate

Last week, I testified before a Texas Senate Subcommittee about the progress of SB 21, the bill that established the Texas Strategic Bitcoin Reserve. Texas passed this bill in 2025 to launch a bitcoin reserve funded by the General Revenue Fund, which pools funds from sales taxes across the state. The subcommittee wanted an update on the establishment of the reserve, and I testified specifically on bitcoin custody, given my research in this space.

I was on a panel with two members of the Texas Comptroller’s Office who are handling the details and logistics of executing the strategic reserve. Our panel was just one of many. Others were examining, for example, the use of cryptocurrency kiosks across the state and whether the state should take any action, given the high number of recent scams. There were several other panels that day, including one on insurance.

I focused my remarks on the technical mechanics of bitcoin custody. I explained some of the basics of Bitcoin, private keys, and single signatures. I then discussed multisignatures, key sharding, and full custodial options. I concluded with a brief discussion of quantum computing.

The panel was at the end of the day, so we did not have time for extensive questions. Below, I have linked a copy of the testimony that I submitted to the Senate, as well as a video of my testimony itself.

Here is a link to the video, and below is the text of the testimony.

Chairman Schwertner and members of the committee,

My name is Korok Ray. I am a professor at Texas A&M University’s Mays Business School and an affiliated faculty member in the Department of Computer Science. It is an honor to testify before you regarding the interim charge on Senate Bill 21 and the establishment of the Texas Strategic Bitcoin Reserve.

First, let me say that there is a very close connection between Texas and Bitcoin. Many of the major bitcoin mining companies have facilities across the state because of our free-market energy grid and our size and scale. Austin is a hub for Bitcoin development, and Bitcoin aligns closely with the Texas values of freedom, property rights, and self-sovereignty.

Let me explain a little about Bitcoin and bitcoin custody.

When you buy bitcoin, what you are really acquiring is control of a private key that allows you to send that bitcoin to another address on the Bitcoin blockchain, which is where all bitcoin resides.

You can store your private key in a wallet. A hot wallet is connected to the internet, such as a wallet on your phone. This makes it easy to send bitcoin to other people. Another option is cold storage, in which you transfer your keys to a device that is offline and no longer connected to the internet, such as a hardware device, a thumb drive, or even a paper wallet.

The security of Bitcoin relies on some of the most advanced cryptography in the world. To our knowledge, Bitcoin itself has never been hacked. The attacks involving bitcoin have instead targeted exchanges and institutions operating on top of the Bitcoin protocol.

The benefit is that when you buy bitcoin, your bitcoin can be held securely. The cost is that if you lose your private keys, you may permanently lose access to it. There are several possible solutions to this problem.

The first is what we call on-chain multisignature. This requires multiple keys (or signatures) to authorize the transfer of bitcoin. A useful analogy comes from movies involving nuclear submarines, in which both the captain and the first officer must turn their keys before a missile can be launched.

Another option is called key sharding. This involves taking a single key and dividing it into multiple pieces. None of those pieces can independently authorize the transfer of bitcoin, but a specified combination of them—such as two out of three pieces—can do so.

The third option is full custody. Under this arrangement, a third-party institution holds the private keys on your behalf and transfers the bitcoin at your request.

The market for bitcoin custody is very active, and there is considerable variation in the practices used by the major firms offering custody solutions. My recommendation would be that the State of Texas not enter the business of directly self-custodying its private keys. The state does not yet have the history, experience, or established practices necessary to manage private keys itself.

Instead, I would recommend identifying a vendor with best-in-class security and ample insurance coverage. Most importantly, the vendor should commit not to lend the state’s bitcoin to anyone else. Ideally, the arrangement should also allow the state to track its bitcoin and ensure that its holdings are not commingled with the assets of another entity.

You may also have heard about the potential quantum-computing risk to Bitcoin. Let me briefly address that issue. Theoretically, a sufficiently powerful quantum computer could break Bitcoin’s current cryptographic signatures. Realistically, however, we are still years away from that capability. The Bitcoin community is already engaged in a global effort to identify and develop post-quantum signatures. Bitcoin developers and major corporate holders of bitcoin are helping to lead that effort. I am confident that the community will eventually agree on an appropriate post-quantum signature. The core developers could then introduce an upgrade to the Bitcoin software, allowing active users to move their bitcoin to post-quantum-secure addresses.

Let me close where I began. It is an honor to be here. I believe Texas is poised for greatness, and the state aligns closely with Bitcoin’s underlying values of freedom, property rights, and sovereignty.

I am happy to answer any questions the committee may have.