Last Friday's post was inspired by a recent article written by Daniel Sanches entitled"Bitcoin vs. the Buck: Is Currency Competition a Good Thing?" Economic Insights (Vol. 3, Issue 2, p. 9) in which he observes:
"Indeed, for 150 years, U.S. financial firms such as commercial banks had been prohibited from issuing currency. And even though financial deregulation in the past two decades has provided U.S. banks with the opportunity to issue electronic currency to compete with official money, banks have not ventured into the business of private currency issuance."
This immediately reminded me that California continues to maintain a statutory prohibition on private money:
"No corporation, social purpose corporation, association, or individual shall issue or put in circulation, as money, anything but the lawful money of the United States."
Cal. Corp. Code § 107. This statute on its face bars the issuance of money by a California state chartered bank because the bank is a "corporation" as defined by the GCL. Cal. Fin. Code § 1004(a) ("A California state bank is a corporation incorporated under Division 1 (commencing with Section 100) of Title 1 of the Corporations Code that is, with the approval of the commissioner, incorporated for the purpose of engaging in, or that is authorized by the commissioner to engage in, the commercial or industrial banking business.") and Cal. Corp. Code § 162. As California's banking regulator, the Commissioner of Business Oversight has the authority to enforce this prohibition on California chartered banks. The Commissioner, however, does not have the authority to enforce the General Corporation Law against California corporations that are not licensed under the banking law or one of the many other laws that the Department of Business Oversight administers.