Is Arizona Getting Gold & Silver-Backed Transactional Currency?

Arizona Bill Would Create Gold and Silver-Backed Transactional Currency

Bullion.Directory precious metals analysis 28 January, 2025
By Mike Maharrey
Journalist, analyst and author at Money Metals Exchange

A well-meaning bill filed in the Arizona Senate seeks to establish a state-sanctioned transactional currency backed 100 percent by gold and silver, along with a state-operated bullion depository.

Interestingly, the state would also issue physical gold and silver coins, even as such actions by a state are explicitly barred by the U.S. Constitution.

The legislation seeks to create government infrastructure to facilitate the everyday use of sound money, while also offering a government-run alternative to private-sector storage for precious metals.

Sen. Jake Hoffman and Sen. Rachel Jones filed Senate Bill 1096. The legislation would establish the Arizona Bullion Depository to serve as storage for precious metals and facilitate the issuance of state-minted gold and silver coins, along with a specie-backed transactional currency.

The depository provisions are based on a similar law that was passed in Texas and signed into law by Gov. Abbott in 2015.

The government-run bullion depository would serve as the “custodian, guardian and administrator of certain bullion and specie that may be transferred to or otherwise acquired by this state or an agency, a political subdivision or another instrumentality of this state.”

The proposed law specifies that the state treasurer “may deposit a portion of state monies in the depository in the form of bullion, and that bullion deposit is considered part of this state’s financial reserves.”

While many private options are already available, individuals and businesses could alternatively choose to deposit their bullion into the government’s own depository.

Gold and Silver Transactional Currency

Under SB1096 the Director of the Arizona Department of Insurance and Financial Institutions would be required to issue specie (gold and silver coins) and establish a transactional currency “as the director determines to be practicable.”

Article 1 Section 10 of the U.S. Constitution, however, states that “No State shall… coin Money,” an activity that is delegated to Congress and reserved to the people themselves.

Specie is defined as “a precious metal that is limited to gold and silver and that is stamped into coins of uniform shape, size, design, content and purity that are suitable for or customarily used as currency, as a medium of exchange or as the medium for purchase, sale, storage, transfer or delivery of precious metals in retail or wholesale transactions.”

A transactional currency is defined as “a representation of actual precious metals, specie, and bullion held in a depository account by a depository account holder that may be transferred by electronic instruction and that reflects the exact unit of physical precious metals, specie or bullion in the pooled depository account in its fractional troy ounce measurement.”

The government depository would manage the transfer of the digital transactional currency between parties and ensure it is backed 100 percent by physical gold or silver held there.

Practical Impact

Despite its drafting problems, this legislation is representative of an exciting increase in support for sound money reforms.

Ownership of gold and silver gives people a way to shield themselves from the rapid loss of purchasing power inherent in the fiat dollar, and state policymakers across the nation are increasingly backing sound money proposals to address these problems.

Private gold transactional currencies already exist. For instance, any citizen may spend their gold and silver coins, bars, and rounds, so long as the other party is willing to accept them as payment.

Also, some services enable folks to do business using a debit card that seamlessly converts gold and silver to fiat currency in the background.

The existence of private options for facilitating gold and silver transactions is a fact that has not escaped legislators in other states – and this reality has so far created significant headwinds for passing complex bills of this nature.

Background

The United States Constitution states in Article I, Section 10, “No State shall…make any Thing but gold and silver Coin a Tender in Payment of Debts.” Currently, all debts and taxes in most states are either paid with Federal Reserve Notes (dollars) which were authorized as legal tender by Congress, or with coins issued by the U.S. Treasury – very few of which have gold or silver in them.

The Federal Reserve destroys this constitutional monetary system by creating a monopoly based on its fiat paper currency. Without the backing of gold or silver, the central bank can easily create money out of thin air.

This not only devalues your purchasing power over time; it also allows the federal government to borrow and spend far beyond what would be possible in a sound money system. Without the Fed, the U.S. government wouldn’t be able to maintain all of its unconstitutional wars and programs. The Federal Reserve is the engine that drives the most powerful government in the history of the world.

State laws that facilitate and encourage the use of sound money create a playing field where people can push back against the Fed’s monetary malfeasance. Ultimately, it could create a scenario where people can drive out the “bad” fiat money with “good” sound money.

This article was originally published here

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