PHOENIX,ย Ariz. (Mar. 12, 2025) โ On Monday, an Arizona House committee passed a bill that 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.
Sponsored by Sen. Jake Hoffman and Rep. Rachel Jones, Senate Bill 1095 (SB1095) would ban the use of CBDC as โlegal tenderโ in the state:
โFederally 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.โ
It would also amend the Arizona Uniform Commercial Code (UCC). Currently, โmoneyโ is defined asย โa medium of exchange authorized or adopted by a domestic or foreign government,โย and includesย โa monetary unit established by intergovernmental organizations or agreements between countries.โย SB1095 would add language to clarify that moneyย โdoes not include a federally recognized central bank digital currency.โ
On March 11, the House Commerce Committee passed SB1095 by a 6-4 vote.ย The Senate has already approved the measure by a vote of 17-12.
Similar legislation has already been signed as law in Arkansas, Indiana,ย Florida,ย South Dakota,ย Tennessee, andย 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 theย Uniform Law Commission, โBecause 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 โthe backbone of American commerce.โโ
Passage of this bill would,ย as noted by one opponent of the legislation, put a CBDC โinto the bucket of โgeneral intangiblesโโ โ rather than money, and wouldnโt 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 strategyย and supporters of CBDCs generally take the position that states canโt doย anything to stop a CBDC, since โย according to their viewย โ under the supremacy clause โany federal law on this point will automatically override state law.โ
Weโve heard this song and dance on other issues before. Thatโs what they said before California legalized medical marijuana in 1996. It didnโt quite turn out that way.
โRoadblockโ is likely how this and other state-based strategies to oppose a CBDC will play out. This is part ofย James Madisonโs four-step blueprintย for how states and individuals can stop federal programs. Madison said โa refusal to cooperate with officers of the unionโ along with โthe embarrassments created by legislative devices,โ would โoppose, in any State, difficulties not to be despised.โ
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 toย 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 thanย the digital offspring of paper fiat moneyย with all the negative characteristics that come with it.
At the root of the move toward government-run digital currency is โthe war on cash.โ The elimination of cash creates the potential for the government to track every transaction you make. Officials could even โturn offโ an individualโs ability to make purchases.
Economist Thorsten Polleit outlined the potential for Big Brother-like government control with the advent of a digital euro inย an article published by theย Mises Wire. As he put it, โthe path to becoming a surveillance state regime will accelerate considerablyโ if and when a digital currency is issued.
In 2022, the Federal Reserve released a โdiscussion paperโ examining the pros and cons of a potential US central bank digital dollar. According toย the central bankโs 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, itโs important to remember he wonโt hold office forever and we canโt 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.
Asย Thomas Jefferson advised, โIt is better to keep the wolf out of the fold, than to trust to drawing his teeth and talons after he shall have entered.โ
WHATโS NEXT
SB1095 will now move to the House Rules committee where it must get a hearing and pass by a majority vote before moving to the full House.
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