BISMARCK, N.D. (Jan. 20, 2025) – A bill filed in the North Dakota House would make gold and silver legal tender in the state and repeal all taxes on its exchange. The legislation would also explicitly exclude central bank digital currency (CBDC) from the definition of money under the Uniform Commercial Code (UCC).

Rep. Nathan Toman along with seven cosponsors filed House Bill 1441 (HB1441). Under the proposed law, “specie legal tender,” defined as “gold or silver specie issued by the United States or any other form of gold or silver specie,” would be legal tender in North Dakota.

In effect, under the law, gold and silver would be considered a valid medium of exchange for the payment of debts in the state.

The passage of HB1441 would make North Dakota the sixth state to recognize gold and silver as legal tender, as they always should have been doing. Utah led the way, reestablishing constitutional money in 2011. Wyoming, OklahomaArkansas, and Louisiana have since joined.

IN PRACTICE

Practically speaking, this would allow North Dakota residents to use gold or silver as money rather than as mere investment vehicles.

Passage of HB1441 would represent a big first step against the fiat-based Federal Reserve system by creating a foundation to pull the rug out from under it on the state and local levels. In essence, it would set the stage for the people themselves to undermine the Federal Reserve monopoly by introducing competition into the monetary system.

The next step would be for people to start taking advantage of the status of gold and silver as money by using both as such instead of Federal Reserve notes.

The effect has been most dramatic in Utah where the Specie Legal Tender Act opened the door for the development of a robust gold and silver economy in the state. With some legal hurdles cleared away by the state’s legal tender law, the United Precious Metal Association (UPMA) in partnership with Alpine Gold Exchange set up the state’s first “gold bank.”

The Act has also led to the creation of the Goldback, a local, voluntary medium of exchange. Goldbacks are notes made from fractions of an ounce of physical gold. The company created a process that turns pure gold into a spendable physical form for small transactions.

New Hampshire also boasts a thriving gold and silver economy. While the state does not officially recognize bullion as legal tender, this has not deterred thousands of residents from using it in private transactions. Because there are no state tax barriers on precious metals, a favorable tax climate – combined with a population willing to embrace sound money – has positioned New Hampshire as another model for others to follow.

REMOVING TAXES

HB1441 declares, “The exchange, purchase, or sale of any type or form of specie legal tender may not give rise to any tax liability of any kind.

This would effectively end the capital gains tax on gold and silver specie. This would take an important step toward treating gold and silver as money instead of commodities. Taxes on precious metal bullion erect barriers to using gold and silver as money by raising transaction costs.

Imagine if the IRS sent you a bill every time the dollar strengthened against the euro. That’s effectively what capital gains taxes on gold and silver do. As the precious metals prices go up due to the devaluation of the dollar, the government levies a tax on you. It is essentially a tax on the superior performance of gold and silver as money.

“We ought not to tax money – and that’s a good idea. It makes no sense to tax money,” former U.S. Rep. Ron Paul said during testimony in support of an Arizona bill that repealed capital gains taxes on gold and silver in that state. “Paper is not money, it’s fraud,” he continued.

BACKGROUND

The United States Constitution states in Article I, Section 10, “No State shall…make any Thing but gold and silver Coin a Tender in Payment of Debts.” Currently, all debts and taxes in most states are either paid with Federal Reserve Notes (dollars) which were authorized as legal tender by Congress, or with coins issued by the U.S. Treasury – very few of which have gold or silver in them.

The Federal Reserve destroys this constitutional monetary system by creating a monopoly based on its fiat paper currency. Without the backing of gold or silver, the central bank can easily create money out of thin air.

This not only devalues your purchasing power over time; it also allows the federal government to borrow and spend far beyond what would be possible in a sound money system. Without the Fed, the U.S. government wouldn’t be able to maintain all of its unconstitutional wars and programs. The Federal Reserve is the engine that drives the most powerful government in the history of the world.

State laws that facilitate and encourage the use of sound money create a playing field where people can push back against the Fed’s monetary malfeasance. Ultimately, it could create a scenario where people can drive out the “bad” fiat money with “good” sound money.

CBDCs

HB1441 explicitly declares central bank digital currency “not legal tender,” and it would also exclude CBDC from the definition of money in the state Uniform Commercial Code (UCC).

Under the North Dakota UCC, “money” is defined as “a medium of exchange authorized or adopted by the United States or foreign government. The term includes a monetary unit of account established by an intergovernmental organization or by agreement between two or more governments. ” HB1441 would add language to clarify that “‘Money’ does not include a central bank digital currency.”

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.

WHAT’S NEXT

HB1441 was referred to the House Industry, Business and Labor Committee. There will be a hearing on Jan. 22 at 2:30 p.m. in room 327C.

Mike Maharrey