Article I, Section VIII of the US Constitution gives Congress the power to “coin money, regulate the value of money and foreign coins, and fix the standard of weights and measures.”
“Coin money” is, according to Black’s Law Dictionary, “casting pieces of metal into a prescribed shape, weight, and degree of fineness, and stamping them with prescribed devices, by government authority, in order that they may circulate as money.” .”
Minted money is included in the definition of currency. Again, according to Black’s Dictionary, currency is “minted coin and banknotes or other paper money which are authorized by law and actually circulate from hand to hand as a medium of exchange.”
Fast forward 235 years since the US Constitution was ratified and the discussion is over a central bank digital currency. The Board of Governors of the Federal Reserve System defines a central bank digital currency (CBDC) as “a digital liability of a central bank that is widely available to the general public.” A CBDC, according to the Board of Governors, would allow the public to make digital payments.
In other words, a member of the general public using a CBDC would have an account at a federal reserve bank and use this account to make payments.
Can an individual today have an account with the Fed? No. Currently, federal government agencies, member banks of the Federal Reserve System, and certain foreign bank branches are the primary entities permitted to maintain reserve accounts. Congress would have to pass legislation amending the Federal Reserve Act to allow the general public to have accounts at the Federal Reserve.
Under the US Constitution, can Congress “digitize money”? That may depend on whether the process of minting money and the process of digitizing money can be equated for public policy reasons. The end result of the currency is to provide the American public with a payment system that connects the political economy, builds faith in the financial system, and validates the legitimacy of the American government to control this jurisdiction.
(How is politics affecting currency trading and value? Get my book at amazon.com/author/altondrew.)
If the conversion of the analog representation of currency, i.e., a coin or bill, into discrete units of data (bits) that can be separately addressed (identified or designated) can provide the American public with a financial system in which can still have confidence while maintaining government legitimacy, then Congress could expand the definition of coinage to include the digitization of money.
The other question is what impact would a central bank digital currency have on retail forex trading? I will deal with that in the near future.
June 22, 2023
Disclaimer: This blog post should not be considered legal or financial advice. Consult a lawyer or financial adviser before making an investment decision.
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