South Dakota legislators have proposed a new amendment to the Uniform Commercial Code (UCC) that would prohibit the use of cryptocurrencies as a medium of exchange, effective July 1, 2024. The proposed amendment would limit the definition of “money” to exclude cryptocurrencies, but central bank digital currencies (CBDC) would still be considered money under the new definition. Republican Mike Stevens introduced the bill, and the changes to the UCC have raised concerns about choice-of-law issues that could arise in cases of bankruptcy involving individuals or companies holding cryptocurrency.
This proposed amendment is a step in the opposite direction of other lawmakers who advocate for the adoption of cryptocurrencies as a medium of exchange. The proposed definition of “money” includes only mediums of exchange authorized or adopted by a domestic or foreign government, an intergovernmental organization, or an agreement between countries. Electronic records that are a medium of exchange and recorded and transferable in a system that existed before the medium of exchange was authorized or adopted by the government would not be included under this definition, excluding cryptocurrencies.
While some lawmakers support cryptocurrencies, the South Dakota bill is in contrast with the “CBDC Anti-Surveillance State Act” recently introduced by Minnesota Republican Tom Emmer, who supports cryptocurrencies. The new bill contrasts with the UCC’s recent addition of “controllable electronic records” to regulate digital assets at the state level, and this proposed amendment would treat cryptocurrencies and CBDC separately. The US does not currently have a CBDC, but research is underway for a “digital dollar,” such as the Digital Dollar Project.
It is yet to be seen how this proposed amendment will be received, and whether other states will follow South Dakota’s lead. The changes to the UCC raise concerns about choice-of-law problems that could occur if companies or individuals with cryptocurrency holdings face bankruptcy. Juliette Moringiello, a member of the U.S. Uniform Law Commission and American Law Institute joint committee, expressed her concerns about these issues before the completion of the UCC changes.