California on the verge of making bitcoin "lawful money"

Even in a state that is home to many of the best-known bitcoin startups in the world, digital currency still exists in something of a legal gray area. Transactions not backed by the U.S. dollar have a different legal status under California law, are there are a variety of disincentives and penalties for using alternative payments methods on the books.

Under California Assembly Bill 129, this would change. The bill seeks to give cryptocurrency and other alternative forms of value exchange, like Amazon Coins to Starbucks Stars, status as “lawful money,” providing some measure of validation and protection for growing the payment systems. With hundreds of millions of dollars invested in bitcoin development through Silicon Valley venture capital, the move has been widely supported by the state’s tech industry.

AB-129 only recently passed the California Senate Banking and Financial Institutions Committee, and was approved by the California Assembly yesterday in a 52-11 vote. It now moves to the desk of Governor Jerry Brown, who is widely expected to sign the bill into law later this week.

Should Brown sign the bill, it would be the first state-level approval of bitcoin as a legitimate payment method. Several other states have allowed or encouraged bitcoin development on a policy level, mostly in an attempt to launch regulatory frameworks around such payments, but without offering such transactions full legal status.