In the United States, a very interesting trend among several states, including Tennessee, Utah, South Carolina, South Dakota, and Florida is emerging to legally redefine money to exclude Central Bank Digital Currencies (CBDCs). This movement aims to distance state financial systems from CBDCs, with bills introduced to specifically exclude them from definitions of legal tender or money.
CBDCs have also become a popular topic in the 2024 presidential race, with candidates like Donald Trump and Ron DeSantis voicing strong opposition to CBDCs, pointing out concerns over government control and individual freedoms. Additionally, the ongoing court battle between Coinbase and the SEC is questioning the definition of securities. The SEC's broad interpretation of securities is being challenged, raising more and more questions about the need for a clearer legal framework in the crypto space.
U.S. States Exclude CBDCs in Legal Definitions
In the U.S., several states have initiated legislative actions to redefine the concept of money in a way that excludes Central Bank Digital Currencies (CBDCs). The main goal for all of these states is to distance state financial systems from CBDCs.
In Tennessee, State Senator Frank Niceley proposed a bill to the Tennessee Senate on Jan. 12 that aims to amend the Tennessee Uniform Commercial Code (UCC). The UCC currently defines money as an authorized medium of exchange. Niceley's bill seeks to explicitly state that this definition "does not include any central bank digital currency."
Similarly, in Utah, Representative Tyler Clancy introduced House Bill 164 to the Utah House of Representatives on Jan. 4. This bill describes a CBDC as a digital form of money issued by government entities, including the U.S. Federal Reserve. However, it also seeks to clarify that a CBDC is not legal tender in the state. In other words, the bill aims to exclude CBDCs from being considered as money under the Utah Specie Legal Tender Act and the state’s UCC.
In South Carolina, State Senator Shane Martin filed Senate Bill 861 on Nov. 30 of 2023. The bill mirrors the Tennessee initiative, proposing to add a clause to the state’s UCC definition of money that excludes CBDCs. South Dakota has also joined this trend. The Department of Labor and Regulation requested the introduction of Senate Bill 58 on Jan. 9, also seeking to exclude CBDCs from the state's definition of money in its UCC.
These state-level actions follow the footsteps of Florida, where Governor Ron DeSantis signed a bill that not only restricts the use of CBDCs in the state but also bans the use of CBDCs issued by foreign governments. The Florida bill also encourages other states to use their commercial codes to implement similar restrictions.
This wave of legislative efforts across multiple states suggests that there is a growing skepticism and caution towards the adoption of CBDCs in the United States. By amending their commercial codes, these states could be setting a precedent that could negatively impact the acceptance of CBDCs in the American financial system.
Digital Currency Debate Takes Center Stage in 2024 Presidential Race
Donald Trump also does not seem too excited about the prospect of a CBDC in the U.S. In his recent campaign speech in Portsmouth, New Hampshire, he pledged to prevent the establishment of a CBDC in the United States, pointing towards concerns over government control and the potential threat to individual freedoms. Trump argued that a CBDC would enable the federal government to exert complete control over citizens' finances, potentially leading to unauthorized access and manipulation of personal funds
This stance aligns with a very similar promise made by Florida Governor and fellow Republican presidential candidate Ron DeSantis, who vowed to oppose CBDCs as well. Despite DeSantis' pledge, he recently fell behind Trump in a key Iowa poll, trailing by more than 10 points since the launch of his campaign.
Vivek Ramaswamy , another Republican contender known for his crypto-focused policy proposals, withdrew from the race after securing only 8% of the votes in the Iowa Caucus. After his withdrawal, Ramaswamy announced his support for Trump, consolidating the former president's position in the race.
The influence of cryptocurrency and digital financial policies is increasingly recognized as a pivotal factor in the upcoming 2024 U.S. presidential election. John Reed Stark, a former SEC enforcer, agrees with this and even suggested that every presidential candidate should appoint a dedicated Crypto Czar to handle crypto-related matters in their campaigns.
Coinbase Challenges SEC’s Definition of Investment Contracts
The United States has also been scrutinizing exactly what securities are. In a recent legal battle between Coinbase and the United States Securities and Exchange Commission (SEC), a New York court witnessed intriguing arguments regarding the definition of securities.
During the five-hour hearing, an interesting moment occurred when District Judge Katherine Polk Failla questioned the SEC's broad definition of securities. The judge’s remarks came in response to the SEC's attempt to differentiate Beanie Babies, a popular collectible, from securities. Jeremy Hogan of the Hogan & Hogan law firm pointed out that the SEC struggled to make this distinction, suggesting that for the SEC, even Beanie Babies could be considered securities.
Jake Chervinsky, legal chief at crypto venture capital firm Variant, believes that the hearing exposed a fundamental flaw in the SEC’s legal approach, potentially transforming almost any asset into a security. This was echoed by Coinbase’s legal chief, Paul Grewal, who criticized the SEC for claiming extensive authority without a clear boundary for what constitutes an investment contract.
The hearing also delved into the major questions doctrine, a 2022 Supreme Court ruling emphasizing that certain matters should be left to Congress. Despite this, securities lawyer James Murphy noted that Judge Failla appeared hesitant to dismiss the case based solely on this. However, Chervinsky highlighted that the judge acknowledged issues in the SEC's case, reinforced by Senator Cynthia Lummis’ brief discussing Congress' ongoing debate on crypto regulation.
Ultimately, Judge Failla concluded the hearing without a decision on Coinbase’s dismissal motion, leaving open the possibility of a partial dismissal.
