Last March, I pointed out that Corporations Code Section 107 prohibits any corporation, flexible purpose corporation, association or individual from issuing or putting in circulation, as money, anything but the lawful money of the United States. This raised the question in my mind whether Bitcoin was money. See Ever Wonder What Money Is? California Has Some Answers And I Have Some Questions.
I don’t know whether my posts had anything to do with it, but late last month, Assembly Member Roger Dickenson gutted and amended AB 129 to address the question. As currently amended, the bill amends Section 107 as follows:
A corporation, flexible purpose corporation, association, or individual person shall not issue or put in circulation, as money, anything but the lawful money of the United States. Nothing in this section shall prohibit the issuance and use of alternative currency that is redeemable for lawful money of the United States or that has value based on the value of lawful money of the United States but a corporation, flexible purpose corporation, association, or individual person shall not be required to accept alternative currency.
The Assembly Floor Analysis makes it clear that the intent is to make “clarifying changes to current law to ensure that various forms of alternative currency such as digital currency, points, coupons, or other objects of monetary value do not violate the law when those methods are used for the purchase of goods and services or the transmission of payments.” This statement is clearly overbroad in that the bill would only amend Section 107 of the Corporations Code and does not change other laws that might apply (such as laws governing securities, commodities, or the transmission or exchange of money).
The bill analysis also makes it clear that the focus isn’t just on Bitcoin. The analysis lists 19 communities in California that have created “community currencies”.
As does my original post, the bill analysis describes the origin of Section 107 in the California Constitution. It then observes: “This was a common prohibition across the states during the 19th century as the risk of states, or even non-state entities creating their own money was a real concern.” Oddly, the analysis doesn’t explain why the issuance of money by non-state entities is no longer a cause for concern.
As amended, Section 107 would prohibit persons from issuing or putting into circulation money, but then provides that this doesn’t the issuance of alternative currency. This raises the question of whether “money” and “currency” are the same thing. The General Corporation Law doesn’t define either term, but the terms are defined in other California Codes.
Finally, I find the statement that a person “shall shall not be required to accept alternative currency” to have a special meaning. In effect, it is saying that alternative currency is not legal tender, meaning that it is not money that a creditor is required to accept “in requital of a debt expressed in money of the realm”. See William S. Jevons, Money and the Mechanism of Exchange 76 (1885).