Bill Description: House Bill 585 bans central bank digital currencies and would prevent the state and local governments from imposing regulations that prevent the holding, mining, and use of digital assets.

ANALYST NOTE: This legislation is very similar in design to Senate Bill 1296. One difference is that SB 1296 applies specifically to the digital asset, Bitcoin, while HB 585 applies to all digital assets. HB 585 also has additional provisions, not included in SB 1296, to ban central bank digital currencies. 

This legislation was also amended on March 15, 2024 to remove provisions relating to nondiscrimination in electricity ratemaking for digital asset miners. This change did not affect the Idaho Freedom Foundation’s rating of the legislation.

Rating: +4

Does it increase barriers to entry into the market? Examples include occupational licensure, the minimum wage, and restrictions on home businesses. Conversely, does it remove barriers to entry into the market?

House Bill 585 would prevent state and local governments from creating undue or discriminatory regulations that would effectively prohibit digital asset mining businesses or home-based mining operations. These regulations would cover topics such as noise, zoning, and money transmission.

Many digital assets depend on blockchain, or distributed ledger technologies, that rely on networks of miners to independently verify transactions and preserve their store of value. Overly burdensome regulations can bar miners from participating in the market. This bill prevents undue regulations, preserving a low barrier to entry into the market.

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Does it directly or indirectly create or increase any taxes, fees, or other assessments? Conversely, does it eliminate or reduce any taxes, fees, or other assessments?

This legislation creates a new section that prevents the state or local governments from imposing special taxes or collections for the use of digital assets as a method of payment. It preserves provisions in Idaho Code to allow the state to collect other taxes that may be applicable to owning digital assets or that are not specific to using them as a method of payment.

Presently, a capital gains tax is applied to purchases made using digital asset holdings that have appreciated in value. This makes it difficult to use those assets for day-to-day transactions. It is often challenging to track which digital asset tokens or fractions of a token have appreciated, and by how much, in a given transaction.

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Does it violate the spirit or the letter of either the United States Constitution or the Idaho Constitution? Examples include restrictions on speech, public assembly, the press, privacy, private property, or firearms. Conversely, does it restore or uphold the protections guaranteed in the U.S. Constitution or the Idaho Constitution?

Western tenets of natural rights, most famously expressed by John Locke, rank the right to own private property tantamount to the right to life or liberty. The spirit of the United States Constitution draws on these ideas more broadly in its construction. But provisions in the Fourth Amendment are also commonly argued to protect the right to maintain custody of and use digital assets.

Digital assets, though virtual, are private property. This bill protects private property by guaranteeing the right to mine, maintain self-custody of, and use digital assets.

Provisions in HB 585 that relate to money transmission also protect users from unwarranted government searches and seizures of digital assets. Licenses to transmit money are presently being weaponized at the federal level to force miners to aid the government in warrantless financial surveillance of Americans. This threat to liberty is common to the banking system but largely avoidable in the digital asset ecosystem. Additionally, it is improper to require miners to follow money transmission regulations because they never exchange money; they only monitor the ledger. Writing digital asset miners out of Idaho’s money transmission code prevents government surveillance and unconstitutional regulation from taking hold at the state level.

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Does it violate the principles of federalism by increasing federal authority, yielding to federal blandishments, or incorporating changeable federal laws into Idaho statutes or rules? Conversely, does it restore or uphold the principles of federalism?

House Bill 585 includes provisions barring the state from participating in the use, development, or testing of a central bank digital currency. It also prevents the state from participating in any federal program or accepting any grant or award that would require the use of a central bank digital currency.

Central bank digital currencies are not money, but a means of tracking the exchange of money at the federal level. This allows the federal government to circumvent constitutional requirements for the use of gold and silver as legal tender. But a CBDC’s use as a means of exchange also means that this program falls outside the federal government’s constitutional authority to determine what is legal tender.

This ban on central bank digital currencies reasserts the federal government has no right to control the state’s financial business.

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