SIOUX FALLS, S.D. (KELO) – In one week, state lawmakers will gather in Pierre to consider vetoes from Gov. Kristi Noem.
One of those vetoes involves House Bill 1193, where Republican senators believe they have enough votes to sustain a veto, but a two-thirds majority margin is less certain in the House of Representatives. Ahead of next week’s gathering at the Capitol, Republican Sen. David Wheeler has been answering questions for lawmakers about the 117-page bill.
“Only Congress can create money. Only Congress can define what we use as money in the United States,” Wheeler told KELOLAND News. “That’s why we’re not redefining money for any of those purposes. We’re only defining it for purposes of use by judges in these commercial transactions.”
What is HB-1193?
HB-1193 adopts changes drafted by the Uniform Commercial Code allowing for law reforms to cryptocurrency. The full bill is 117 pages long, but the president of the South Dakota Bankers Association says 95% of the bill is already existing law.
“The only new piece is Article 12, which identifies the digital assets,” Karl Adam said. “There’s a lot there, but the vast majority of it is current state law with the addition of Article 12.”
“Digital assets” include cryptocurrency, like Bitcoin, which are currently in a legal gray area under the UCC, which provides the commercial law rules for everyday transactions.
Wheeler said the UCC takes commerce “as it is and not how we want it to be, or how we not want it to be.”
“As new technology arises, just like cryptocurrency has, we have basic laws in place, so that people can understand what definitions are and how their contracts will be interpreted by a judge,” Wheeler said. “Those types of basic foundational things that are necessary for a well functioning financial system.”
HB-1193 passed the House 49-17, which is a big enough margin to override a veto, while it passed the Senate 24-9, also big enough to override a veto. Wheeler said he expects 24 senators to support HB-1193 with possibly a few more votes supporting.
“This is a bill that just takes a lot of education,” Wheeler said. “Once people understand what it actually does, they come around to realizing it’s the best thing to move forward for cryptocurrencies in South Dakota. Once you realize what we’re doing it for, a lot of the fear goes away.”
What is the Uniform Commercial Code?
The UCC was developed in the 1940s and 1950s to develop strong interstate markets with strong legal structure.
“When we’re sitting in Sioux Falls and we order a sweater from somebody in Bangor, Maine, they get the money, we get the sweater with no disruption,” David Owen, president of the South Dakota Chamber of Commerce and Industry said. “These are the rules of how purchases and commerce flow.”
Owen said he jokes that without the UCC, transactions would be back to a “barter system.”
“I can trade you my Snickers bar for your Coke. If you agree to it, then it’s a reasonable deal. Willing seller, willing buyer,” Adam said. “The same thing holds true with the definition of money. This is that legal infrastructure that allows business transactions to be conducted with legal certainty.”
Adam said the Uniform Law Commission helps put the UCC together and has “no agenda.” The updates to the UCC come after more than three years of drafting rules with input from cryptocurrency advocates.
“It was three and a half years of open forums and meetings to discuss and identify how to properly move forward with the digital asset definitions,” Adam said. “Whether you like it or not, whether you’re a crypto fan or not, it has no bearing on this discussion. It (cryptocurrency) is out there and it needs to be defined in legal terms in this code and that’s what it does.”
Owen pointed out buying one Bitcoin is not like holding a $100 bill.
“The value of that Bitcoin will go up and down,” Owen said. “If you take a Bitcoin in exchange for a table, you have to sell the Bitcoin which may have the same value but it may not. The fears that are being created that cryptocurrency will take over money are simply an exaggeration of someone’s worst fears and have no merit.”
Noem’s opposition to HB-1183
In a letter to the Speaker of the House, Noem said, “HB-1193 adopts a definition of ‘money’ to specifically exclude cryptocurrencies like Bitcoin, as well as other digital assets.”
Adam said Noem’s categorization of the bill is false and cryptocurrencies would gain more standing through the legal definitions in HB-1193.
“It gets identified as a controlled electronic record. You don’t want it in the definition of money, because it’s not something you can possess,” Adam said. “By having it as a controllable electronic record, it provides that unique pathway for the virtual currency or crypto-enthusiast to be able to utilize this as a piece of collateral as an example.”
Noem said there’s plenty of time to continue to research and amend the bill. She was concerned about fears HB-1193 would open the door for a Central Bank Digital Currency by the legal definitions.
“That’s paving the way for government controlled money. It just is,” Noem said about HB-1193 at a bill signing in Mitchell last week. “By eliminating all other forms of competition and setting up their own mechanism it’s something they could use in the future in a nefarious way against the American people.”
Noem’s letter also says HB-1193 puts “South Dakota citizens at a business disadvantage.”
Adam again disagreed and said South Dakota would be one of the first states to adopt the new legal definitions which could enhance cryptocurrency industries in the state.
“In South Dakota we take great pride in being open for business and doing things that are very pro-business oriented,” Adam said. “By us not doing so, I think it sends a message that we might not be standing by what we’ve touted for years.”
In a news release, the South Dakota Freedom Caucus said it would be working to sustain Noem’s veto.
“The South Dakota Freedom Caucus will be fighting to sustain the Governor’s veto over the objection of liberal Republican House and Senate leadership,” the news release said.
The opposition is focused on the Central Bank Digital Currency definitions. The U.S. government has not created a CBDC, but a few other nations have which would create legal gray areas if not defined in the UCC.
“Governor DeSantis clearly understands that it is not enough to just stop permissive legislation for a CBDC, which we are still fighting to do,” Republican Rep. Aaron Aylward said. “But it needs to be put down and outlawed outright. We call on Governor Noem to push for legislation prohibiting the use of a CBDC in South Dakota.”