Is California's Legalization of Bitcoins a Game Changer?

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Stephane de Sakutin/AFP/Getty Images
Over the weekend, California Gov. Jerry Brown signed into law a bill that has the potential to change the way commerce is done. The bill, AB 129, written by Democratic Assemblyman Roger Dickinson, legalizes bitcoins and other digital currencies for transactions in California.

"In an era of evolving payment methods, from Amazon coins to Starbucks stars, it is impractical to ignore the growing use of cash alternatives," Dickinson said. "This bill is intended to fine-tune current law to address Californians' payment habits in the mobile and digital fields."

It's hard to overstate the significance of AB 129 given the economic influence the most populous state in the union has over the country and the rest of the world. According to a recent JPMorgan Chase (JPM) report, California's GDP is estimated to hit just under $2 billion for 2015, making it the world's eighth-largest economy -- ahead of Russia, Italy and Canada.

Bitcoin advocate Marc Andreessen, the famed venture capitalist, weighed in on Twitter, saying "Thank you Gov Brown & CA legislature!"

Community Currencies, Too

California'a numerous "community currencies" -- often created to boost local businesses –- were formally legalized by AB 129.

Ironically, in contrast to arguments often put forward by those who claim that authorizing a digital currency would be a legislative and bureaucratic nightmare, new law is only one sentence long and simply repeals a provision that banned the use of "anything but the lawful money of the United States."

The news out of California comes during a particularly tough year for bitcoin. Earlier in the year Mt. Gox, once the world's leading exchange for trading the virtual currency, revealed that it lost more than 850,000 bitcoins (equal to $500 million at current prices), in a hacking attack. The firm later recovered 200,000 of the lost bitcoin.

And the U.S. Marshals Service in June auctioned off 20,000 bitcoin seized during a raid on Silk Road, an Internet marketplace where authorities allege illegal drugs and other outlawed items could be purchased.

Ultimately the federal government has final say over the use of any currency -- including virtual ones like bitcoin -- for commerce among U.S. citizens, businesses and legal entities, trumping even the laws of individual states. However, it is hard to ignore the actions of California in this area, which may lead to similar legislation being enacted in other states.

Brian Lund's blog offers more on personal finance, the stock market, investing and the secret to eternal life.


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16 Comments

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theron

When you take all the fruits and nuts out of california, all thats left is the flakes.......

July 01 2014 at 12:15 AM Report abuse +1 rate up rate down Reply
Tim

I believe that this legislation is unconstitutional. Article 1, Section 10, Paragraph 1 states...

"No State shall ... make any Thing but gold and silver Coin a Tender in Payment of Debts; "...

I'm a big fan of Bitcoin and other alternate currencies, but it's not backed by silver or gold. It really is unconstitutional.

July 01 2014 at 12:03 AM Report abuse +2 rate up rate down Reply
pickwilson3

Monopoly money, Bitcoin? What is the difference between that and wooden nickels?

June 30 2014 at 10:42 PM Report abuse +2 rate up rate down Reply
pickwilson3

trash that scam. Really folkes?

June 30 2014 at 10:41 PM Report abuse +1 rate up rate down Reply
betty.brockbetty

play money

June 30 2014 at 9:22 PM Report abuse +2 rate up rate down Reply
vladimir.hucko

I always wandered who is behind bitcoins. What is clear most people hate federal reserve, dislike government and any central power which is visible and accountable. Now citizens shall be using currency handled by who knows. Users of bitcoins will be in mercy by a force invisible and unaccountable.
Next problems will arise, what few readers already mentioned before. We will loose superior position as world currency and flexibility to pay our bills for social security, defense, schools, border security, etc. How they call it. We will shot ourselves to the foot. It is going to be a lot of fun.

June 30 2014 at 5:57 PM Report abuse +1 rate up rate down Reply
rolando4rocks

Let's see...A HUGE portion of the bitcoin market is owned by the Asian
population,and Calif has the largest and most diverse Asian population
in the U.S....Wonder if that has anything to do with it????

June 30 2014 at 5:28 PM Report abuse +2 rate up rate down Reply
GrnBer

Warning: Please be careful with your money. When sending money to an exchange or seller you are trusting that the operator will not abscond with your funds and that the operator maintains secure systems that protect against theft -- internal or external. It is recommended that you obtain the real-world identity of the operator and ensure that sufficient recourse is available. Because Bitcoin services are not highly regulated a service can continue operating even when it is widely believed that it is insecure or dishonest and webpages recommending them (including these) may not be regularly updated. Exchanging or storing significant amounts of funds with third-parties is not recommended. (https://en.bitcoin.it/wiki/Buying_Bitcoins_(the_newbie_version) Enough said!!!!!!!

June 30 2014 at 5:21 PM Report abuse rate up rate down Reply
juststeve35

An American state accepting non-US Dollars is the first step towards eliminating the dollar as reserve currency.

The day after that occurs, we will be insolvent and at the mercy of our debtors...

Brilliant idea Governor Brown!

June 30 2014 at 5:14 PM Report abuse +3 rate up rate down Reply
mike711l

Since the government is always far behind the curve when it comes to cyber-crime, digital currency is a bad idea.

June 30 2014 at 4:33 PM Report abuse +2 rate up rate down Reply