Does a state need to build its own depository?
What are the custody and depository options for TGS?
A plain-language guide for legislators, policy staff, and advocates navigating one of the most common infrastructure questions surrounding Transactional Gold and Silver.
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Positioning statement Transactional Gold and Silver (TGS) allows ordinary Americans to own real gold and silver -- held in a secure vault within the United States, in their name -- and spend it anywhere using a debit card, while merchants receive ordinary U.S. dollars. Transactional Gold and Silver does not replace the dollar. It is not cryptocurrency. It is not a central bank digital currency. It is not a government mandate. It is “Just Another Way to Pay.” |
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Direct answer No. A state does not need to build, own, or operate a precious-metals depository to enact Transactional Gold and Silver legislation. TGS requires secure custody of the physical gold and silver backing customer accounts, but secure custody does not require a government-owned or operated vault. Authorized Providers can use qualified private custodians or depositories that satisfy the requirements of the law. A state may also choose to authorize, designate, contract with, establish, or operate a depository, but those are additional options, not prerequisites for TGS. The TGS model makes this distinction explicit: nothing in the Act requires the state to establish, acquire, construct, own, operate, fund, contract with, or maintain a depository, vault, payment system, or other physical or technological infrastructure. Plain-English summary: TGS needs a secure place for the gold and silver. It does not need a state-owned gold vault. The state establishes the legal framework and TGS-specific safeguards; the private sector can provide the custody and payment infrastructure. |
Does a state need to build its own depository?
No. Transactional Gold and Silver requires physical gold and silver to exist behind customer accounts, and that metal has to be securely stored somewhere. But the requirement for custody should not be confused with a requirement for a state depository.
Under the TGS model, an Authorized Provider may use a qualifying private custodian or depository. The state does not have to build the facility, own the facility, operate the facility, employ its staff, provide its security, or assume responsibility for the precious metals stored there.
At the same time, the legislation preserves flexibility for states that want a greater role. A state may authorize or designate depositories, contract with existing facilities, establish its own depository, or develop another structure appropriate to that state. None of those choices is necessary for TGS to function.
A state may also have reasons unrelated to TGS for considering depository infrastructure. For example, a state establishing a precious-metals reserve would need to consider appropriate custody for state-owned metal. That is a separate policy question that can be addressed through State Reserve legislation rather than making a state depository a prerequisite for TGS.
The key is flexibility. TGS establishes a legal framework in which privately owned, allocated gold and silver can function as transactional money while remaining securely held in custody. It does not prescribe a single depository model for every state.
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Feature → How it works → Outcome Feature: TGS requires secure custody of the physical gold and silver backing customer accounts; it does not require state ownership or operation of the vault. How it works: An Authorized Provider can arrange custody with a qualifying private custodian or depository that satisfies the TGS-specific requirements established by law. The allocated metal remains physically held in the United States. States remain free to authorize, designate, contract with, establish, or operate additional depository infrastructure if they choose. Outcome: States can enact TGS without constructing new government infrastructure while retaining the freedom to pursue a state depository or other custody arrangements for separate state purposes. |
What are the depository options for a state enacting TGS?
There is no single depository model that every state must adopt. In fact, a state does not have to establish a depository model at all for TGS to function. Authorized Providers can use qualifying private custody, while states remain free to pursue additional depository options if they choose.
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Option |
What it involves |
Key advantages |
Best for |
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Option 1: Provider-arranged private custody |
Authorized Providers use qualified private custodians or depositories that satisfy the requirements of the TGS law. |
No state construction or operation. Preserves provider competition and allows existing private infrastructure to be used. |
States that want TGS without creating new state infrastructure. |
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Option 2: State-authorized or designated depositories |
The state creates a process through which one or more qualifying private facilities may receive state authorization or designation. |
Provides additional state-recognized custody options while allowing multiple facilities to compete. |
States that want a formal depository authorization framework. |
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Option 3: State contract with a private operator |
The state contracts with an existing private depository or private operator for specified custody services. |
Uses private expertise and infrastructure without requiring the state itself to construct and operate a vault. |
States that have a separate public purpose for obtaining state-contracted precious-metals custody. |
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Option 4: State-owned or state-administered depository |
The state chooses to establish or operate its own depository, directly or through a private operating partner. |
Can serve broader state objectives beyond TGS. |
States that independently determine that a public depository serves broader policy objectives. |
These options are not mutually exclusive, and TGS does not require a legislature to choose among them before authorizing Constitutional Money Services. Multiple providers may use different qualifying custodians, and a state that separately establishes a depository can coexist with private custody arrangements.
Can TGS use existing depositories, including facilities outside the state?
Yes, provided the custody arrangement satisfies the requirements of the law. There is no inherent need for every state to duplicate precious-metals vaulting infrastructure that already exists elsewhere.
Under the TGS model, Allocated Specie used in Constitutional Money Services must be physically held within the United States, but it does not have to be stored inside the state that enacted the legislation.
That gives Authorized Providers considerably more flexibility. A provider serving customers in one state can use qualifying U.S. custody infrastructure located in another state rather than requiring a separate bullion facility wherever it operates.
The Texas Bullion Depository is one example of existing U.S. precious-metals custody infrastructure. Private U.S. facilities provide additional examples. The important questions for TGS are whether the custody arrangement satisfies the applicable requirements for ownership, allocation, segregation, auditing, financial protection, redemption, and other safeguards, not whether the vault sits within a particular state's borders.
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What existing U.S. custody infrastructure means for a state No construction requirement: Existing private vaulting infrastructure can be used rather than duplicated. Provider flexibility: Different Authorized Providers can use different qualifying custodians. Competition: Multiple qualifying custody options help preserve competition and avoid unnecessary concentration in a single facility. Lower potential state cost: The state can establish the legal framework without becoming the owner or operator of the physical infrastructure. U.S. custody: Under the current model, Allocated Specie used for TGS must remain physically within the United States. |
How does the depository structure affect a state's fiscal responsibility?
One of the advantages of a flexible custody structure is that enacting TGS does not, by itself, commit a state to the cost of constructing or operating a precious-metals depository.
A secure bullion facility can involve specialized security, insurance, personnel, auditing, physical infrastructure, and ongoing operating expenses. Those costs matter if a state independently chooses to establish its own facility, but they are not an inherent cost of TGS.
Private Authorized Providers can instead use existing qualifying custody infrastructure. In that structure, the provider and its custody partners are responsible for the private infrastructure necessary to deliver the service, while the state performs the responsibilities assigned to it under the legislation.
A state that sees value in having its own bullion depository remains free to pursue one. That decision may arise in connection with a State Precious Metals Reserve or other broader state objectives. It can be evaluated separately on its own merits without delaying or conditioning TGS on construction of state infrastructure.
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How the TGS model treats state infrastructure TGS requires: Secure custody of the allocated gold and silver backing customer accounts. TGS allows: Authorized Providers to use qualifying private custodians and depositories. A state may choose: To authorize, designate, contract with, establish, or operate depository infrastructure of its own. TGS does not require: The state to establish, acquire, construct, own, operate, fund, contract with, or maintain a depository, vault, payment system, or other physical or technological infrastructure. The result: TGS can move forward independently, while questions involving a state depository or custody of a future State Precious Metals Reserve can be considered separately. |
Why does the distinction between a TGS provider and a depository matter?
Because they perform different functions.
The Authorized Provider delivers Constitutional Money Services, the system that allows an Owner to hold allocated precious metal and use its value in transactions. A custodian or depository performs the physical custody function.
Those roles can interact without becoming the same legal role. Under the TGS model, a custodian or depository does not become an Authorized Provider merely because it stores or transports precious metals on behalf of one.
This separation supports both specialization and competition. A company with expertise in payments and customer accounts does not necessarily need to own a bullion vault. It can contract with companies that specialize in secure precious-metals custody.
Likewise, a depository that simply stores precious metals does not become a TGS payment provider merely because an Authorized Provider uses its facility.
This allows each participant to perform the function it does best while preserving clear responsibilities for the protection of the Owner's metal.
What is the most common misunderstanding about state depository requirements?
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Common misunderstanding Every state that passes TGS legislation must build a new secure precious metals vault, a multimillion-dollar construction project that exposes taxpayers to ongoing operational costs and liability. |
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The reality TGS needs secure custody. It does not need a government-owned vault. Authorized Providers can use qualifying private custodians or depositories. A state may also authorize, designate, contract with, establish, or operate a depository if policymakers determine that doing so serves the state's interests, but none of those actions is necessary for TGS itself. A state depository may make sense for other reasons, including custody associated with a State Precious Metals Reserve, but that is a separate policy decision. TGS provides the legal framework and safeguards for transactional gold and silver without requiring the state to become a vault operator. |
Statutory and operational references
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Citations — required for publication Current Transactional Gold and Silver model legislation / Working Draft 12 Texas Bullion Depository; Texas Comptroller of Public Accounts Texas Government Code Chapter 2116 Applicable enacted state TGS legislation discussed in the final published article |
Related questions about TGS depositories
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Related questions: with direct 2-sentence answers Does TGS require the gold and silver to be stored in the state? No. Under the current model legislation, Allocated Specie used for TGS must be physically held within the United States, but the Act does not require the metal to be stored within the Owner's home state. → What consumer protections should a TGS law include? /blog/what-consumer-protections-should-tgs-include/ Can a TGS provider use a private depository? Yes. The current model permits Authorized Providers to use qualifying private custody arrangements rather than requiring the state to own or operate the facility. → What should a model TGS bill include? /blog/what-should-a-model-tgs-bill-include/ Can a state still create its own bullion depository? Yes. A state remains free to establish, authorize, designate, or contract for depository infrastructure if policymakers determine that doing so serves additional state objectives, including a State Precious Metals Reserve. TGS simply does not make a state depository a prerequisite for transactional gold and silver. → What is the Texas Bullion Depository and why does it matter? /blog/what-is-the-texas-bullion-depository/ Could an international gold platform qualify as a TGS provider? A foreign company could potentially participate through a structure that complies with applicable U.S. and state requirements, but the Allocated Specie backing TGS accounts must satisfy the model's U.S. custody requirement. A platform that stores the relevant customer metal exclusively outside the United States would therefore not satisfy that custody requirement. → TGS vs digital gold apps /blog/tgs-vs-digital-gold-apps/ |
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Read the full Transactional Gold and Silver FAQ transactionalgold.com/faq |
