PHOENIX, Ariz. (Jan. 21, 2025) – A bill filed in the Arizona Senate would expressly exclude a central bank digital currency (CBDC) from the definition of money and legal tender in the state, creating potentially significant roadblocks to its use as such in the state.

Sen. Jake Hoffman and Rep. Rachel Jones introduced Senate Bill 1095 (SB1095). The legislation would ban the use of CBDC as “legal tender” in the state:

“Federally recognized central bank digital currency may not be used as legal tender or be the subject or medium of payment of any contract, security or other similar instrument in this state.”

It would also amend the Arizona Uniform Commercial Code (UCC). Currently, “money” is defined as “a medium of exchange authorized or adopted by a domestic or foreign government,” and includes “a monetary unit established by intergovernmental organizations or agreements between countries.” SB1095 would add language to clarify that money “does not include a federally recognized central bank digital currency.”

Arizona is not alone in excluding CBDC from the definition of money in the UCC. Similar legislation has already been signed as law in IndianaFloridaSouth DakotaTennessee, and Utah.

IN PRACTICE

While it remains unclear exactly how it would play out, removing a CBDC from the definition of money and declaring it is not legal tender would throw up roadblocks if the federal government and its central bank try to implement one.

The UCC is a set of uniformly adopted state laws governing commercial transactions in the U.S. According to the Uniform Law Commission, “Because the UCC has been universally adopted, businesses can enter into contracts with confidence that the terms will be enforced in the same way by the courts of every American jurisdiction. The resulting certainty of business relationships allows businesses to grow and the American economy to thrive. For this reason, the UCC has been called ‘the backbone of American commerce.’

Passage of this bill would, as noted by one opponent of the legislation, put a CBDC “into the bucket of ‘general intangibles’” – rather than money, and wouldn’t ban its use completely.

But it could still potentially gum up the works and make it difficult for the government to fully implement a CBDC.

Opponents of the strategy and supporters of CBDCs generally take the position that states can’t do anything to stop a CBDC, since – according to their view – under the supremacy clause “any federal law on this point will automatically override state law.

We’ve heard this song and dance on other issues before. That’s what they said before California legalized medical marijuana in 1996. It didn’t quite turn out that way.

“Roadblock” is likely how this and other state-based strategies to oppose a CBDC will play out. This is part of James Madison’s four-step blueprint for how states and individuals can stop federal programs. Madison said “a refusal to cooperate with officers of the union” along with “the embarrassments created by legislative devices,” would “oppose, in any State, difficulties not to be despised.

But whether these roadblocks will have any impact or not requires more than just mere state legislation. As can be seen so far with issues, whether a federal program is implemented or not ultimately gets down to the willingness of the people to participate, or not.

CENTRAL BANK DIGITAL CURRENCIES (CBDC)

The difference between a central bank (government) digital currency and peer-to-peer electronic cash such as bitcoin is that the value of the former is created, backed, and controlled by the government, just like traditional fiat currency.

In fact, a CBDC is nothing more than the digital offspring of paper fiat money with all the negative characteristics that come with it.

At the root of the move toward government-run digital currency is “the war on cash.” The elimination of cash creates the potential for the government to track every transaction you make. Officials could even “turn off” an individual’s ability to make purchases.

Economist Thorsten Polleit outlined the potential for Big Brother-like government control with the advent of a digital euro in an article published by the Mises Wire. As he put it, “the path to becoming a surveillance state regime will accelerate considerably” if and when a digital currency is issued.

In 2022, the Federal Reserve released a “discussion paper” examining the pros and cons of a potential US central bank digital dollar. According to the central bank’s website, there has been no decision on implementing a CBDC, but this pilot program reveals the idea is further along than most people realized.

While President Trump has promised not to implement a CBDC, it’s important to remember he won’t hold office forever and we can’t count on the goodwill of politicians to protect our liberty. States need to take steps against a CBDC now instead of scrambling if things move forward in the future.

As Thomas Jefferson advised, “It is better to keep the wolf out of the fold, than to trust to drawing his teeth and talons after he shall have entered.

WHAT’S NEXT

SB1095 was referred to the Senate Finance Committee. It’s currently scheduled for a hearing and likely vote on Jan 27 @ 2:00 pm

Mike Maharrey