The Florida legislature passed a bill Wednesday that effectively bans any central bank digital currency (CBDC) from being used in the state.
The new policy says CBDCs issued by any country will not meet Florida’s definition of money. The provision rejects a specific part of the Uniform Commercial Code (UCC), a widely adopted piece of model legislation updated by the American Law Institute and the Uniform Law Commission.
Certain 2022 amendments to the UCC have rankled cryptocurrency proponents because they put all privately created crypto outside the legal definition of money. Under the updated meaning, a CBDC is the only type of digital asset that meets the UCC standard.
In March, the Biden administration announced it would assess the benefits and risks of issuing such a currency.
Governor Ron DeSantis responded to this announcement with a plan to ban CBDCs in Florida. The bill passed in both houses of the state legislature with overwhelming majorities and now requires only the governor’s signature to become law.
The policy was an initiative of the Florida Blockchain Business Association, a Central Florida chamber of commerce led by pro-crypto political consultant Samuel Armes.
Analysts warn against opposing new UCC amendments
The UCC’s 2022 amendments created a new term for distinguishing valuable digital assets like bitcoin and other virtual currencies: controllable electronic records (CERs).
Though the chair of the drafting commission has called these changes to the UCC “echnologically neutral,” the policy drew ire from South Dakota Governor Kristi Noem. She vetoed the amendments in March, calling it a slippery slope to governmental control of all transactions through digital currency.
But some experts have noted how pro-crypto political rhetoric has aligned against regulations that are overall friendly to the industry. Yaël Ossowski is one such analyst who thinks the recent UCC amendments create and expand protections for Bitcoin.
Ossowski is the deputy director of the Consumer Choice Center and visiting fellow at the Bitcoin Policy Insitute. Praising Florida’s new policy compared to less measured reactions in other states, he said, “Much of the confusion surrounding similar commercial code provisions in other states have led to unfortunate vetos of good Bitcoin and cryptocurrency regulations, but it does seem that those protections have been upheld while making it clear that Florida will aim to protect its residents from CBDCs as long (and as legitimately) as they can.”
Amendments to the UCC could end up protecting the purchaser’s rights in the crypto marketplace by defining bitcoin and other valuable digital assets as controllable electronic records. Any purchaser of a CER must by definition have exclusive power over the digital asset, preventing sellers from claiming a right to those assets after a transaction.
There are regulatory challenges that might disappear for cryptocurrency as well. If digital currencies are considered CERs, transactions will avoid the regulation and licensure required to legally transmit money.
Since directing the executive branch to explore a CBDC in March, the Biden administration has yet to reveal any plans to enact such a measure. Nonetheless, politically ambitious governors like Noem and DeSantis have seized the opportunity to distinguish themselves as cryptocurrency’s defenders against the supposed tyranny of state-backed digital currency.
Ossowski said, “We are still unsure how the federal government or Federal Reserve will legally introduce a CBDC, and exactly how states can respond, but this move by the Florida Legislature does seem like a good fit for now, with the added benefit of protecting HODLers and those who want to use Bitcoin and crypto-assets.”