U.S. Constitution Provisions Applicable to Cryptocurrencies
While it may seem somewhat counterintuitive that a document ratified in 1738 would have applicability to a new technology like cryptocurrency, the U.S. Constitution contains a couple provisions relating to cryptocurrency’s formal legal status.
To begin, the Constitution gives Congress the power to set a national currency and to punish counterfeiters. The Constitution also prohibits states from issuing their own currency or permitting anything other than silver and gold to serve as payment of debts. Below is an overview of these provisions (with links):
ARTICLE I, SECTION 8, CLAUSE 5
“[The Congress shall have Power . . . ] To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures; . . .”
As evidenced above, the Constitution grants Congress the power to coin money and regulate its value, which in effect is a grant to create a national currency. Indeed, the U.S. Supreme Court has interpreted this clause as empowering Congress “to establish a national currency, either in coin or in paper, and to make that currency lawful money for all purposes, as regards the national government or private individuals.” Juilliard v. Greenman, 110 U.S. 421, 448 (1884).
The Constitution also clarifies in Section 10, Clause 1 (discussed more fully below) that states do not have that same power. See also Knox v. Lee, 79 U.S. 457, 545 (1870) (“The States can no longer declare what shall be money, or regulate its value. Whatever power there is over the currency is vested in Congress”).
Therefore, Congress retains exclusive power to create legal tender. This means that if any cryptocurrency is to gain status as a legal tender in the U.S., it must be established as such by Congress.
ARTICLE I, SECTION 10, CLAUSE 1
“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.”
This provision prohibits States from issuing coins, emitting bills of credit or making anything other than gold and silver tender in payment of debts. Thus, while some States (like Arizona and California) have contemplated making Bitcoin “legal tender” within their jurisdiction, the Constitution expressly prohibits them from doing so. However, there is an ongoing “scholarly” debate about the extent to which Bitcoin should be considered legal tender. See W. Aaron Daniel, The Constitutional Argument for State Adoption of Bitcoin as Legal Tender (Part I of IV).
However, nothing in the Constitution prevents private businesses or individuals from accepting cryptocurrency as payment for goods or services. The rub is that States cannot obligate (force) private entities or individuals to accept cryptocurrency as payment because doing so would have the effect of making that cryptocurrency legal tender in that State.
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