The California State Assembly has unanimously passed measure AB 129 declaring Bitcoin and other cryptocurrencies as “lawful money.” Bitcoin and other cryptocurrencies like Dogecoin, Ripple, and Peercoin have gained popularity over the past year.
To be clear, “lawful money” is different from “legal tender.” “Lawful money” describes any currency that is legal to use in exchange for goods and services, but is not required to be accepted for debts, taxes, or any other dues. “Legal tender” is different, as the United States Code Title 31, Section 5103 states “United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues.” Boiled down, “legal tender” is to be accepted as a valid currency for debts and dues, while “lawful money” can be accepted, but is not mandatory.
Before the passing of measure AB 129, Bitcoin and other cryptocurrencies were not deemed “lawful money.” In the state of California, it is against the law to issue or circulate any currency that is not “lawful money,” and doing so can result in fines up to $15,000 or 15 years imprisonment. AB 129 clears up the misconception that Bitcoin and other cryptocurrencies may be considered a form of counterfeit money. The measure was passed in a vote of 75-0 late last month, and now requires approval by the California Senate. The passing of measure AB 129 is another step forward for Bitcoin as well as the other 121 cryptocurrencies that have since been created.
It only makes sense that the California State Assembly would declare Bitcoin as lawful money. Many of California technology giants in Silicon Valley have been developing infrastructure that would support the use of Bitcoin and other cryptocurrencies. The use of Bitcoin could potentially help to facilitate transactions across California and the rest of the world – California itself has the twelfth largest economy in the world. In 2013, California’s Gross State Product was $2.08 trillion – matching that of Russia, Italy and India.
Several Bitcoin exchanges faced setbacks earlier this month when a flaw was discovered called “Transaction Malleability.” Since then, Mt.Gox, one of the largest Bitcoin exchanges, has ceased withdrawals and has experienced extreme fluctuations in price. While the current price of Bitcoin on other exchanges is around $619, on Thursday prices at Mt.Gox dropped below $100. Earlier this month, the notorious Bitcoin fueled black market Silk Road 2.0 was “hacked,” resulting in a loss of thousands of Bitcoin – roughly $2.7 million.
The large Utah based online-retailer Overstock.com began accepting Bitcoin early last month, receiving over 3,000 orders in Bitcoin with a total value of over $600,000. Since then, many have pressured Overstock’s primary competitor Amazon.com to accept Bitcoin as well. Also, the first Bitcoin ATM debuted in Texas earlier this week, allowing users to directly convert cash into Bitcoin.
Bitcoin as a whole has received varied responses. Some people are against the cryptocurrency for its use in illegal uses, like the Silk Road along with inability to be tracked. Other’s are in favor of it for the amount of freedom it has from not being controlled by one entity, or regulated by a central bank. Although some may be unsure about the future of Bitcoin and cryptocurrencies as a whole, the California State Assembly’s passing of AB129 declaring Bitcoin lawful money is another step towards Bitcoin being accepted across the country and the rest of the world.
By Tyler Shibata