Beginning on July 1, 2024, the legislation from a Republican state lawmaker would ban the usage of cryptocurrencies as a form of money.
- A bill to change the UCC to remove cryptocurrencies but not CBDCs from its definition of money has been introduced in South Dakota.
- According to the Federal Reserve, a CBDC would only be implemented with widespread public and intergovernmental support.
South Dakota Legislation
The American state of South Dakota has submitted legislation to change the Uniform Commercial Code (UCC) so that cryptocurrency is not included in the definition of money. The revised report still includes central bank digital currencies (CBDCs) as money.
The 117-page proposal defines “money” as “a medium of exchange now sanctioned or adopted by a domestic or international authority.” Republican Mike Stevens proposed the amendment in the Virginia House of Delegates. The phrase comprises monetary units of account created by organizations on the international stage or by agreements between two or more states. The bill goes on to say:
“The phrase “the word does not include” refers to an electronic record that is an exchange medium recorded and transferred in a system that was set up and functional for the exchange medium before the exchange medium was authorized or adopted by the government. Contrary to cryptocurrencies, CBDC is mentioned in the proposed definition of money.”
CBDC Anti-Surveillance State Act
The “CBDC Anti-Surveillance State Act,” recently filed by Minnesota Republican Tom Emmer, who is seen as a proponent of cryptocurrencies, into the U.S. House of Representatives, contrasts with the South Dakota legislation.
The UCC made the notion of “controllable electronic records” official in revisions enacted in July intended to control digital assets at the state level. The new UCC articles also distinguish between CBDCs and cryptocurrencies. There is no CBDC in the U.S., although organizations like the Digital Dollar Project and the U.S. government are researching the idea of a “digital dollar.”
Digital Dollar Project
The white paper “Exploring a U.S. CBDC” by The Digital Dollar Project (DDP) was updated on January 18. Although the project focuses on the United States, it has been expanded to evaluate central bank digital currency programs elsewhere.
In May 2020, the DDP released the first draft of the paper that included its “champion model,” which consists of an intermediary wholesale and retail CBDC. The number of CBDC projects worldwide has expanded from 35 to 114 since that time. The updated DDP paper discusses modern technical developments while maintaining the fundamental principles of the champion model, such as those on privacy and monetary policy.
The author’s concerns about the United States losing ground in CBDC research and leadership dominated the report’s new proposals. Regardless of how the U.S. ultimately decides to go with a dollar CBDC, the authors state:
The U.S. government must “immediately investigate strategies to retain the use of the dollar in digital global payment systems and devise an alternate payment system usage strategy.”
In a document published in January 2022, the Federal Reserve declared that it “would only seek a CBDC in the setting of substantial public and cross-governmental support.” Research on a U.S. CBDC has continued, particularly in Project Hamilton, which recently proclaimed its goal complete after releasing two reports.
Conclusion
Before they were completed, Juliette Moringiello, a member of the joint U.S. Uniform Law Commission and American Law Institute committee that decided on the UCC’s changes, said that the changes “create giant choice-of-law problems, and if any company or any person with crypto ends up in bankruptcy, a bankruptcy court wouldn’t know what law to apply.” If approved, the proposed law will be enacted on July 1, 2024.
