COLUMBIA, S.C. (Jan. 23, 2025) – A bill introduced in the South Carolina Senate would take the first steps toward limiting the impact of any potential future central bank digital currency (CBDC) in the state.

Sen. Danny Verdin filed Senate Bill 163 (S163). The legislation would prohibit any governing authority in South Carolina from accepting or requiring payment using central bank digital currency. It would also bar any state or local government agency from participating in any test of central bank digital currency by the Board of Governors of the Federal Reserve System or branch or agency of the federal government.

S163 is similar to laws passed in Alabama, Indiana, Georgia, South Dakota, and North Carolina.

The legislation also has provisions that would facilitate the use of non-government cryptocurrencies such as Bitcoin, including prohibiting any ban on its private use or implementation restrictions on digital currency mining. The provisions would help facilitate monetary competition, potentially undermining the Federal Reserve’s monopoly on money.

IN PRACTICE

Prohibiting state and local governments from accepting CBDC payments would throw up one roadblock to its implementation by limiting its use in the state. It would also signal to people in the state that a CBDC is to be avoided.

In the spirit of James Madison’s blueprint for how states and individuals can stop federal programs, the enactment of H690 would create “impediments” to the implementation of a CBDC in South Carolina. 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.”

It remains unclear how state efforts to hinder a CBDC would play out in practice, should the federal government attempt to implement one.

Opponents of the strategy and supporters of CBDC 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.

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, 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 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 central bank 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 digital currency, 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 after the fact 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

S163 was referred to the Senate Committee on Banking and Insurance where it must get a hearing and pass by a majority vote before moving forward in the legislative process.

Mike Maharrey