With the decision of El Salvador’s president, Nayib Bukele, to adopt Bitcoin as ‘legal tender’ in the Central American nation, complete with the state-provided ‘Chivo’ wallet, a plot of oceanfront deemed ‘Bitcoin Beach’, and plans for a pseudo-utopian Bitcoin City funded by Bitcoin bonds, the idea of legislating Bitcoin as ‘legal tender’ has jumped to the forefront of political discussion with bitcoin in the subject.
Tennessee has joined Arizona, Texas, and California as having drafted legislation to make Bitcoin legal tender. But what does that actually mean? Let’s go to the dictionary:
Definition of legal tender
: money that is legally valid for the payment of debts and that must be accepted for that purpose when offered
And ‘legal tender’ doesn’t have such a good reputation in American history: take a look at President Lincoln’s error out of necessity, the Legal Tender Act of 1862, which was proposed in order to ‘borrow’ from the production of the country to fund the Civil War effort. This article by Philip W. Newcomer, published by fee.org in 1986 elucidates the facts:
https://fee.org/articles/the-illegality-of-legal-tender/
I would urge you to read this article as it outlines the reasons that Legal Tender laws were initially ruled unconstitutional by the Supreme court, and then the painfully weak reasoning for which the laws were later allowed to stand. Regardless of the legality of legal tender laws in the US, one glaring obstacle stands in the way of individual states declaring Bitcoin legal tender:
Article 1, Section 10 of the US Constitution:
No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.
So as soon as any of these bills were to become law in any of these states, they’re doomed to be struck down as unconstitutional. Trying to add Bitcoin as a constitutional amendment becomes problematic in that it needs to be defined, unlike gold or silver which are physical elements. The rush of other crypto projects that say they should be included in such an amendment, let alone any hard forks that would claim to be Bitcoin in the future would make trying to compose a draft just as difficult as trying to get it passed in ¾ of the state legislatures. So the pursuit is a waste of breath, paper, and ink.
We should not seek legal tender status for Bitcoin.
Instead, we should strive to make its gains tax free. It’s one thing for governments to accept Bitcoin as payment, but they still count the gains on that payment as taxable.
The real next steps are to make capital gains untaxed altogether, eliminating the need for IRAs, deferment plans, and tax shelters of many types. It would increase liquidity for capital and incentivize active investment into new American ventures with domestic and foreign money alike, it would free the American middle class to invest in what they choose, without the encumbrances of having to take out loans against their own money or having to wait to utilize saved assets until such an age as the IRS will permit. It would lower prices of goods through vibrant competition, and create more jobs for the American worker.
Bitcoin doesn’t need a legal status to give it value: the market has determined that already. Bitcoin doesn’t need the government to determine its validity, purity, or genuineness: nodes and miners around the world are incentivized to do that already. Bitcoin needs to be left alone, to act as a true scale upon which the monetary and fiscal policies of the world’s governing bodies might be weighed.