AUGUSTA, Maine (May 12, 2023) – Last week, a Maine committee held a hearing on a bill that would establish a state-chartered bank outside of the federal banking system authorized to issue transactional currency 100 percent backed by gold coins and bullion minted by the bank. The passage of this legislation would create an alternative banking option for individuals and businesses, including marijuana businesses. It would also create an alternative for people to conduct business in sound money, set the stage to undermine the Federal Reserve’s monopoly on money, and possibly create a viable alternative to a central bank digital currency (CBDC).

Sen. Eric Brakey and along with five cosponsors introduced Senate Bill 1635 (LD1635) on April 12. The legislation would create the Maine State Bank. This state-chartered bank would accept deposits of funds in all lawful forms of currency, including but not limited to United States dollars, internationally recognized money issued by foreign governments, gold and silver bullion issued by recognized mints, and blockchain-based cryptocurrency. The bank would create a mechanism to process exchanges between all currencies accepted for deposit.

On May 2, the Committee on Health Coverage, Insurance and Financial Services held a public hearing on LD1635, an important first step in the legislative process.


The Maine State Bank would be authorized to issue gold coinage and bullion minted by the state celebrating the state’s heritage in various denominations by weight. It would also issue a gold-backed, blockchain-based transactional currency with the bank holding 100 percent reserves in the form of gold coins and bullion minted by the state bank.

The creation of state-issued gold-backed digital currencies would create currency competition with Federal Reserve notes and undermine the Fed’s monopoly on money. It would also provide a sound money-backed competitor if the Federal Reserve implements a central bank digital currency.

Broadly speaking, by making gold and silver conveniently available for regular, daily transactions by the general public, gold-backed digital currency would create the potential for a wide-reaching effect. Professor William Greene, an expert on constitutional tender, said in a paper for the Mises Institute that when people in multiple states actually start using gold instead of Federal Reserve notes, it would effectively nullify the Federal Reserve and end the federal government’s monopoly on money.

“Over time, as residents of the state use both Federal Reserve notes and silver and gold coins, the fact that the coins hold their value more than Federal Reserve notes do will lead to a ‘reverse Gresham’s Law’ effect, where good money (gold and silver coins) will drive out bad money (Federal Reserve notes).

“As this happens, a cascade of events can begin to occur, including the flow of real wealth toward the state’s treasury, an influx of banking business from outside of the state – as people in other states carry out their desire to bank with sound money – and an eventual outcry against the use of Federal Reserve notes for any transactions.”

Gresham’s Law holds that “bad money drives out good.”  For example, when the U.S. government replaced silver quarters and dimes with coins made primarily of less valuable copper, the cheap coins drove the silver out of circulation. People hoarded the more valuable silver coins and spent the less valuable copper money. So, how do you reverse Gresham?

The key is in making it easier to use gold in everyday transactions. The reason bad money drives out good is that governments put up barriers to using sound money in day-to-day life. That makes it more costly to spend gold and incentivizes hoarding. When you remove barriers, you level the playing field and allow gold to compete head-to-head with Federal Reserve notes. On an even playing field, gold beats fiat money every time.


Under the law, the Maine State Bank would accept deposits from and transact business with any person legally authorized under the laws of the State to conduct business in the State, including but not limited to cannabis businesses. This would create an important banking option for the state’s legal marijuana businesses.

The Federal government has used banking laws as a weapon in its unconstitutional war on cannabis by making it impossible for marijuana businesses to access the banking system – even in states where marijuana has been legalized. The feds can prosecute bankers for knowingly engaging with cannabis businesses under the Bank Secrecy Act, the USA Patriot Act, and the Racketeer Influenced and Corrupt Organizations (RICO) Act. Since the federal government insures or charters virtually every bank in the U.S., cannabis businesses have been forced to transact almost exclusively in cash.

The Federal Reserve has also gotten into the act, denying its services to state banks chartered to serve the marijuana industry. State-chartered banks do not have to be members of the Federal Reserve system, but the Fed can deny any non-member bank or credit union access to its services. In other words, the Federal Reserve can lock any bank attempting to operate in the cannabis industry out of the broader banking system, making it impossible for them to do business with any other bank or merchant. With the passage of LD1635, Maine could just bypass the entire federal banking system and its regulations, and create a self-contained banking network for the marijuana industry.


An “ought-to-pass” report by the Committee on Health Coverage, Insurance and Financial Services would greatly enhance the chances of LD1635 passing in the Senate and House.

Mike Maharrey

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