On Saturday, California Governor Jerry Brown signed Assembly Bill 129 (AB129) into law, allowing alternative currencies, such as Bitcoin or Dogecoin, to be used within the state. The passage of AB129 repeals California Corporations Code Section 107, which prohibited corporations, associations and individuals from putting into circulation as money, “anything but the lawful money of the United States.”
An important distinction is that AB129 makes Bitcoin and other similar alternative currencies ‘lawful money’ rather than legal tender. The difference between the two is that legal tender must be accepted as payment in a transaction. Lawful money may be offered as payment, but the recipient is not required to accept it as such.
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The new law may seem to be a formality to many, given that the area’s high-tech industry has long promoted Bitcoin and ATMs dispensing the currency existed in the state months before AB129 became law. Plug and Play Tech Center, a Sunnyvale-based venture capitalist, announced last winter that it was investing in Bitcoin startups. Robocoin launched the state’s first Bitcoin ATM in Mountain View back in March. According to CoinDesk, other Bitcoin ATMs are operational at two Locali food and convenience stores in Los Angeles.
It appears that California is simply acknowledging the realities of commerce in 2014 and that by making AB129 law, it is giving businesses the flexibility to transact in different currencies without fear of prosecution, but does it end there? Is this adding convenience to financial transactions or laying the groundwork for eventual regulation?
The FBI shutdown of Silk Road last fall may cast some doubt on the ability of cryptocurrencies to escape government control. Busting the operation meant the FBI had to undermine the onion routing of Tor and locate one of Silk Road’s servers in another country. Thanks to treaties that facilitate assistance between law enforcement agencies in other countries, the FBI was able to get a copy of one of the Silk Road server’s contents and discover records of 1.2 million transactions. This resulted in the seizure of thousands of Bitcoins, many of which were auctioned off last week.
This does not mean that the Feds can trace individual Bitcoin transactions to a specific person and regulate them in the same way that banking transactions are regulated, but the government seems pretty comfortable trading Bitcoins and the computing power of the NSA may eventually defeat the anonymity of cryptocurrencies. Many of the same problems that led to regulation of transactions in fiat currency would likely eventually extend to alternative currencies once they become widely adopted and the demand for regulation would continue to increase. Given these conditions, it’s hard to see these currencies remain outside the reach of government regulation for very long.
Edited by Maurice Nagle
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