A Bill (act to amend Section 107 of the Corporations Code, relating to business associations) introduced by California State Assembly member and Chairman on Banking and Finance Roger Dickenson on January 15th “AB-129 Lawful money: alternative currency” (PDF) as Amended January 23, 2014 specifies that “current law which bans the issuance or circulation of anything but lawful money of the United States does not prohibit the issuance and use of alternative currency.”
Reading between the lines, right now within the state lines of California it appears that the world’s favorite cryptocurrency does not conform with state law (i.e. its illegal!).
The most recent action on the amendment indicates that it was sent to the Senate Banking and Finance on February 6th shortly after it unanimously passed assembly on January 29th with 75 votes YES, 0 votes NO and 5 voted present/not voting.
The Bill Analysis explains that:
“This bill makes clarifying changes to current law to ensure that various forms of alternative currency such as digital currency, points, coupons, or other objects of monetary value do not violate the law when those methods are used for the purchase of goods and services or the transmission of payments.”
and further explains how current state law (to be changed) is more restrictive than federal law:
“…no corporation, flexible purpose corporation, association, or individual shall not issue or put in circulation, as money, anything but the lawful money of the United States.”
The bill also hints that other established alternate currencies known as “Community Currencies” such as Bay Bucks of San Francisco are currently in violation of state laws that have not been enforced. Selective enforcement of the law (i.e. reigning in on Bitcoin but not Community Currencies) would be arbitrary and capricious. The bill also appears recognize Bitcoin as a freedom of speech issue as the analysis explains that Community Currencies have “…become a form of political protest as some communities that use such currency do so in protest of United States monetary policies, or large financial institutions.”
However, the bill specifically does not make Bitcoin legal tender by “..prohibit{ing} a person from being required to accept alternative currency.”
In the middle of last year California made headlines when it’s Department of Financial Institutions sent a bizarre cease and desist order addressed to the BitCoin [sic] Foundation for conducting money transmission in the state. Later in the year, the California Legislature passed a bill to reform the California Money Transmission Act. Roger Dickenson was also the chairman of Banking of Finance when this amendment was passed and stated that the bill would “remove barriers to market entry to start-up payment technology companies.”
California’s “AB-129 Lawful money: alternative currency”, passed assembly the same day that New York Department of Financial Services (NYDFS) held public hearings on virtual currencies.
New York, the financial capital of the world (PDF) and California, the technology capital of the world appear to going head to head with one another for regulatory clarity around cryptocurrencies. With New York home to both Silicon Alley and Wall Street, California needs to foster a sensible regulatory landscape to keep Bitcoin startups in California.
Bitcoin exchanges in California and New York both made headlines in the past week with San Francisco-based Kraken (ie.Payward) announcing (Twitter) that it was unaffected by the Distributed Denial-of-Service attack / transaction malleability issues affecting other Bitcoin exchanges, and New York City based SecondMarket recently announced a pilot exchange for “qualified bitcoin market players.”
P.S. Note to California: You have a couple of typographical errors in your bill analysis that should be corrected:
1) It’s Bitcoin Miners not Bitcoin “Minors”
2) In regards to Bitcoin being pseudonymous (which you correctly identified as not anonymous) you mention IP addresses being “recoded” [sic], I think you meant “recorded” and Bitcoin users addresses certainly aren’t being recorded in the block chain but rather with the layered services that they are using.
