Arizona is likely to become the first state in the US to make bitcoin a legal tender. Senator Wendy Rogers has passed a bill, adding the popular crypto to the list of instruments considered legal tender in America’s southwestern state. It will enable the citizens of Arizona to pay debts, public charges, taxes and due with BTC.
Experts say that if the bill is given the go-ahead, all financial transactions in this state would most likely be done in bitcoin. People could opt to receive their salaries directly in bitcoin and companies would have the freedom to use the cryptocurrency. It should be noted that the bill highlights “bitcoin” specifically and not cryptocurrency in general. It doesn’t mention any other digital assets.
If all goes well, Arizona will become the first US state to recognize bitcoin as legal tender. But experts say it will not be a smooth process as the US Constitution might make passing the bill tough. Preston Byrne, a partner at law firm Anderson Kill, said the “Coinage Clause” of the Constitution bestows Congress with exclusive power to determine what is and isn’t legal tender in the United States. He believes the bill will become “symbolic” if it does get passed.
States in America, in the 1800s, tried to work around this challenge by issuing their own “state banknotes” with little success. Congress, through the National Bank Acts of 1865 and 1866, put an end to this practice by placing a 10% tax on payments made in a currency other than national banknotes. Steve Gannon, an attorney at Murphy and McGonigle, pointed out that the main issue here is whether digital assets are actually currencies or forms of money. He asked for the purpose of Arizona would be accepting digital assets as legal tender. Gannon also questioned whether bitcoin is another method of payment with respect to state contracts. If so, there would be a limited use case.
Byrne believes that if the bill is passed, there wouldn’t be much impact on the use of BTC in the state. The Arizona state government would like bitcoin as payment for taxes. But this wouldn’t change the overall legal treatment of BTC as property from a federal tax perspective.