LITTLE ROCK, Ark. (Jan. 15, 2025) – A bill filed in the Arkansas Senate would expressly exclude a central bank digital currency (CBDC) from the definition of money under the Uniform Commercial Code (UCC), creating potentially significant roadblocks to its use as such in the state.
Senate Bill 47 (SB47), filed by Senator Justin Boyd and three cosponsors, seeks to amend the Arkansas UCC. Currently, “money” is defined as “a medium of exchange authorized or adopted by a domestic or foreign government, including monetary units established by intergovernmental organizations or agreements between countries.” SB47 adds language to clarify that “‘Money’ does not include a central bank digital currency.”
The bill also proposes to exclude CBDCs from the definition of a “deposit account” under the UCC, further limiting their recognition and use within the state’s legal framework.
Arkansas is not alone in pursuing this approach. Similar legislation has already been signed as law in Indiana, Florida, South Dakota, Tennessee, and Utah.
IN PRACTICE
While it remains unclear exactly how it would play out, removing a CBDC from the definition of money 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
SB47 was referred to the Senate Insurance and Commerce Committee where it must get a hearing and pass by a majority vote before moving forward in the legislative process.
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