Kristi Noem, the governor of South Dakota, has used her authority to veto legislation aimed at changing the definition of money to exclude cryptocurrencies.
In a March 9 notice to South Dakota house speaker Hugh Bartels, Noem said she had vetoed House Bill 1193, which proposed amending the state’s Uniform Commercial Code, or UCC, to specifically exclude cryptocurrencies and other digital assets — with the possible exception of central bank digital currencies, or CBDCs. According to the governor, passage of the bill would put South Dakota residents “at a business disadvantage” and potentially allow for “future overreach” from the federal government in issuing a digital dollar.
“By expressly excluding cryptocurrencies as money, it would become more difficult to use cryptocurrency,” said Noem. “HB 1993 opens the door to the risk that the federal government could more easily adopt a CBDC, which then may become the only viable digital currency […] It would be imprudent to create regulations governing something that does not yet exist.”
I have returned HB 1193 with my VETO.
The bill adopts a definition of “money” to specifically exclude cryptocurrencies. But these revisions do include Central Bank Digital Currencies as money.
These developments concern me for several reasons, which are found in this letter: pic.twitter.com/3eqzdI80if
— Governor Kristi Noem (@govkristinoem) March 10, 2023
Conservative advocates supported efforts to have Noem veto the legislation, citing concerns for financial freedom. The organization Club for Growth penned a letter to the South Dakota governor urging her to oppose the bill and making comparisons between a U.S.-issued CBDC and China’s digital yuan. The South Dakota Freedom Caucus — a group of Republican state lawmakers — lauded Noem’s actions:
— South Dakota Freedom Caucus (@SDFreedomCaucus) March 10, 2023
Under the proposed UCC amendment, money would be defined as “a medium of exchange that is currently authorized or adopted by a domestic or foreign government”. Analysts have claimed that the wording of the bill which excluded many digital assets would not apply to CBDCs: “An electronic record that is a medium of exchange recorded and transferable in a system that existed and operated for the medium of exchange before the medium of exchange was authorized or adopted by the government”.
While China’s central bank has been conducting trials for its CBDC since it was introduced in April 2020, the U.S. government is still exploring the potential benefits and risks associated with issuing a digital dollar. As with the South Dakota bill, there has also been pushback to CBDCs at the federal level. In February, Minnesota Representative Tom Emmer introduced legislation aimed at limiting the Federal Reserve’s authority over a CBDC.