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California Bill to Legalize Bitcoin

A Bill (act to amend Section 107 of the Corporations Code, relating to business associations) introduced by California State Assembly member and Chairman on Banking and Finance Roger Dickenson on January 15th “AB-129 Lawful money: alternative currency” (PDF) as Amended January 23, 2014 specifies that “current law which bans the issuance or circulation of anything but lawful money of the United States does not prohibit the issuance and use of alternative currency.”

Reading between the lines, right now within the state lines of California it appears that the world’s favorite cryptocurrency does not conform with state law (i.e. its illegal!).  

The most recent action on the amendment indicates that it was sent to the Senate Banking and Finance on February 6th shortly after it unanimously passed assembly on January 29th with 75 votes YES,  0 votes NO and 5 voted present/not voting.

The Bill Analysis  explains that:

“This bill makes clarifying changes to current law to ensure that various forms of alternative currency such as digital currency, points, coupons, or other objects of monetary value do not violate the law when those methods are used for the purchase of goods and services or the transmission of payments.”

and further explains how current state law (to be changed) is more restrictive than federal law:

“…no corporation, flexible purpose corporation, association, or individual shall not issue or put in circulation, as money, anything but the lawful money of the United States.”

The bill also hints that other established alternate currencies known as “Community Currencies”  such as Bay Bucks of San Francisco are currently in violation of state laws that have not been enforced.  Selective enforcement of the law (i.e. reigning in on Bitcoin but not Community Currencies) would be arbitrary and capricious. The bill also appears recognize Bitcoin as a freedom of speech issue as the analysis explains that Community Currencies have “…become a form of political protest as some communities that use such currency do so in protest of United States monetary policies, or large financial institutions.”

However, the bill specifically does not make Bitcoin legal tender by “..prohibit{ing} a person from being required to accept alternative currency.”

In the middle of last year California made headlines when it’s Department of Financial Institutions sent a bizarre cease and desist order addressed to the BitCoin [sic] Foundation for conducting money transmission in the state. Later in the year, the California Legislature passed a bill to reform the California Money Transmission Act.  Roger Dickenson was also the chairman of Banking of Finance when this amendment was passed and stated that the bill would “remove barriers to market entry to start-up payment technology companies.”

California’s “AB-129 Lawful money: alternative currency”, passed assembly the same day that  New York Department of Financial Services (NYDFS)  held public hearings on virtual currencies.

New York, the financial capital of the world (PDF) and California, the technology capital of the world appear to going head to head with one another for regulatory clarity around cryptocurrencies.  With New York home to both Silicon Alley and Wall Street, California needs to foster a sensible regulatory landscape to keep Bitcoin startups in California.

Bitcoin exchanges in California and New York both made headlines in the past week with San Francisco-based Kraken (ie.Payward) announcing (Twitter) that it was unaffected by the Distributed Denial-of-Service attack / transaction malleability issues affecting other Bitcoin exchanges, and New York City based SecondMarket recently announced a pilot exchange for “qualified bitcoin market players.”

P.S. Note to California: You have a couple of typographical errors in your bill analysis that should be corrected:  

1) It’s Bitcoin Miners not Bitcoin “Minors”

2) In regards to Bitcoin being pseudonymous (which you correctly identified as not anonymous) you mention IP addresses being “recoded” [sic],  I think you meant “recorded” and Bitcoin users addresses certainly aren’t being recorded in the block chain but rather with the layered services that they are using.

BTC: 1Gg3MSaj8FDnueVrZX5HSA94BersRHKqNp

LTC: LdD9radmMcPrZDaKVJhkHCdaVbsVb4wZ3V

By

Brian’s first article on e-commerce "Reaching eBay Global Markets with the Help of PayPal Multiple Currencies" was published by AuctionBytes in December 2002. In addition to Bitcoin Magazine he currently writes for EcommerceBytes and Let's Talk Bitcoin! His favorite assignments are "open secrets." When Brian is not thinking about Bitcoin he enjoys rooftop gardening. You can reach him on his website Bitofthis.com or on Twitter @inthepixels

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  • Serge Bonaparte

    Nice :)

  • http://www.ArticulateVentures.com/ Vance

    Fantastic news (I think).

  • kittycatdestroyer

    there is a huge difference between an endorsement and legalization. Bitcoin was not illegal prior to this bill, it is just further legitimized by it.

  • Rene

    So, California says that Bitcoin was illegal, but they now say that Bitcoin is not illegal within California State. Right?

  • CryptoCoinUser

    We don’t need permission to innovate, but let’s not pass by the low-hangning (political) fruit: If you’re in California, contact your congressman in Sacramento and tell him to support this bill since the Bitcoin economy creates innovation, jobs, votes etc.
    Once Bitcoin gets a wide-enough adoption, however, any legislation about it will be a moot point.
    So just use it and help others gets started.

  • gubatron

    s/pseudonymous/pseudo-anonymous/g

    a pseudonymous is a nick name. Bitcoin is almost anonymous, pseudo-anonymous.

    • oceanicorganic

      No. A pseudonym is a “nickname” or more broadly a name used by someone whose name it is not. In Bitcoin, your pseudonym is your Bitcoin address.

      Bitcoin could possibly be described as pseudo-anonymous, but it’s much better described as pseudonymous because it’s a bunch of people using fake names to pay each other publicly (instead of using real names to pay people privately).

  • CCIFan

    Re: Illegality. Wouldnt the Federal Supremacy clause come into effect as FINCEN said it was perfectly allowable to mine Bitcoins solely for the person’s own use?

  • lensgrabber

    “do not violate the law when those methods are used for the purchase of goods and services or the transmission of payments” so would this protect localbitcoiners from the laundering dangers like in FL?

  • Grammar is My Name

    “…no corporation, flexible purpose corporation, association, or individual shall not issue or put in circulation, as money, anything but the lawful money of the United States.” There’s a double negative in this sentence, so what’s this all about then?

  • http://twitter.com/5tephenjhall Stephen

    Bitcoin isn’t money… so it’s a bunch of talk about nothing.

    • http://twitter.com/5tephenjhall Stephen

      “The constitution of the United States has vested in congress the power “to coin money, and regulate the value thereof.”

      • Jdack

        Keyword is “coin”, does not apply to paper or other currencies.

  • BrandonG

    Reading between the lines, right now
    within the state lines of California it appears that the world’s
    favorite cryptocurrency does not conform with state law (i.e. its
    illegal!). “its” needs an apostrophe unless bitcoin is possessing the illegal.
    P.S. Note to you: you have a couple of typographical errors in your article that should be corrected.

    • Meni

      Interestingly, Brian also makes the opposite error: “…when it’s Department of Financial Institutions…”

  • Nikky Sikks

    a $1.00 bill, a single USD is an issuance of $1.00 in real debt by the Federal Reserve. Holding a federal reserve note saying $1.00 , means you owe the Federal Reserve $1.00. Don’t forget the USA went bankrupt and everything, all it’s assets were assigned to UCC code. What faith do you have in a currency being deployed by a bankrupt nation? Don’t forget the Federal Reserve is not part of any government agency, accountable to no one. BTC on the other hand is not debt, it’s a fluctuating currency, like stocks, bonds, the weather, etc.

  • http://dentalservice4less.com kattypitts

    Depends on what the meaning of the word “is” is.