BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 129
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          CONCURRENCE IN SENATE AMENDMENTS
          AB 129 (Dickinson)
          As Amended  May 22, 2014
          Majority vote
           
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          |ASSEMBLY:  |75-0 |(January 29,    |SENATE: |28-3 |(June 19,      |
          |           |     |2014)           |        |     |2014)          |
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           Original Committee Reference:    B. & F.  

           SUMMARY  :  Repeals existing law which bans the issuance or  
          circulation of anything but lawful money of the United States.

           The Senate amendments  repeal Financial Code (FC) Section 107  
          which bans the use of anything but lawful currency.
           
          EXISTING FEDERAL LAW  provides that manufacturing counterfeit  
          United States currency or altering genuine currency to increase  
          its value is a violation of United States Code (U.S.C.) Title 18  
          Section 471 and is punishable by a fine of up to $5,000, or 15  
          years imprisonment, or both. 

          Possession of counterfeit United States obligations with  
          fraudulent intent is a violation of U.S.C. Title 18 Section 472  
          and is punishable by a fine of up to $15,000, or 15 years  
          imprisonment, or both. 

          Anyone who manufactures a counterfeit United States coin in any  
          denomination above $0.05 is subject to the same penalties as all  
          other counterfeiters.  Anyone who alters a genuine coin to  
          increase its numismatic value is in violation of U.S.C. Title 18  
          Section 331, which is punishable by a fine of up to $2,000, or  
          imprisonment for up to five years, or both. 

          Forging, altering, or trafficking United States Government  
          checks, bonds, or other obligations is a violation of U.S.C.  
          Title 18 Section 510 and is punishable by a fine of up to  
          $10,000, or 10 years imprisonment, or both. 

          Printed reproductions, including photographs of paper currency,  
          checks, bonds, postage stamps, revenue stamps, and securities of  
          the United States and foreign governments (except under the  
          conditions previously listed) are violations of U.S.C. Title 18  








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          Section 474.  Violations are punishable by fines of up to  
          $5,000, or 15 years imprisonment, or both. 

          U.S.C. Title 31 Section 5103 declares that United States coins  
          and currency (including Federal Reserve Notes and circulating  
          notes of Federal Reserve banks and national banks) are legal  
          tender for all debts, public charges, taxes, and dues.

           EXISTING STATE LAW  provides under Corporations Code Section 107  
          that no corporation, flexible purpose corporation, association,  
          or individual shall not issue or put in circulation, as money,  
          anything but the lawful money of the United States.

           AS PASSED BY THE ASSEMBLY  , this bill amended FC Section 107 to  
          specify that alternative currency such as digital currency are  
          legal to use.  Subsequent research provided that FC Section 107  
          was not necessary, so the entire section is repealed via the  
          Senate amendments.
           
          FISCAL EFFECT  :  None

           COMMENTS  :  This bill makes clarifying changes to current law to  
          ensure that various forms of alternative currency such as  
          digital currency, points, coupons, or other objects of monetary  
          value do not violate the law when those methods are used for the  
          purchase of goods and services or the transmission of payments.   
          Modern methods of payment have expanded beyond the typical cash  
          or credit card transactions.  Bitcoin, a digital currency (also  
          called cryptocurrency), has gained massive media attention  
          recently as the number of businesses has expanded to accept  
          Bitcoins for payment.  Long before the introduction of digital  
          currencies, various businesses have created points models that  
          reward consumers with points for completion of various tasks  
          such as spending a certain dollar amount, or even by purchasing  
          points with dollars.  These point systems effectively operate as  
          currency allowing the consumers to buy a retail item or pay for  
          some type of service.  Many communities across the United States  
          and in California have created "community currencies" that are  
          created by members of a community in conjunction with merchants  
          who agree to accept the alternative currency.  These "community  
          currencies" are created for a variety of reasons, some of which  
          include encouraging consumers to shop at small businesses within  
          the community or increasing neighborhood cohesiveness.   
          "Community currency" has also become a form of political protest  
          as some communities that use such currency do so in protest of  








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          United States monetary policies, or large financial  
          institutions.  The following is a list of alternative  
          currencies:

          1)BerkShares.  While Bitcoin and Litecoins are worldwide  
            currencies, BerkShares are hyper-local:  they are only  
            accepted in the Berkshires, a region in western Massachusetts.  
            According to the BerkShares Web site, more than 400 Berkshires  
            businesses accept the currency, and 13 banks serve as exchange  
            stations.  "The currency distinguishes the local businesses  
            that accept the currency from those that do not, building  
            stronger relationships and greater affinity between the  
            business community and the citizens," the site reads.

          2)Equal Dollars.  Philadelphia is also trying out a local  
            currency with Equal Dollars. When you sign up to participate,  
            you receive 50 Equal Dollars; to earn more, you can offer your  
            own possessions in an online marketplace, volunteer or refer  
            friends.

          3)Starbucks Stars.  Use of Starbucks Stars is limited not to a  
            particular geographic locality, but to the corporate ecosystem  
            that is Starbucks.  Once you get a Starbucks Card, you can  
            earn Starbucks Stars - which buy drinks and food - by paying  
            with the card, using the Starbucks app, or entering Starbucks  
            Star codes from various grocery store products.  According to  
            Kemp-Robertson, 30% of transactions at Starbucks are made  
            using Starbucks Stars.

          4)Amazon Coins.  Another company-specific currency, Amazon  
            Coins, can be exchanged for "Kindle Fire apps, games, or  
            in-app items."  You get 500 Amazon Coins, worth $5, by  
            purchasing a Kindle Fire, or can buy more Amazon Coins at a  
            slight savings.

          5)Linden Dollars.  Usable within the online community Second  
            Life, can be bought with traditional currency or earned by  
            selling goods or offering services to other Second Life  
            residents.  Many people earn actual Linden salaries - some to  
            the tune of a million Linden Dollars.

          6)Bitcoin.  Bitcoin has garnered the most attention of any other  
            digital currency, but even for its increasing awareness in the  
            marketplace, many people do not completely understand what it  
            is or how it works.  Bitcoin has been called the world's  








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            "first decentralized digital currency" and was created in 2009  
            by a programmer using the alias, Satoshi Nakomoto.  The idea  
            behind Bitcoin is that it doesn't have a central clearinghouse  
            or any singular authority and it is not pegged to any real  
            tangible currency.  Its value arises from the value that  
            people assign to it.  It works via peer-to-peer network where  
            tasks are shared amongst multiple interconnected peers who  
            each make a portion of their resources (computing power)  
            directly available to other network participants, without the  
            need for centralized coordination by servers.  The network  
            depends on users who provide their computing power to  
            reconcile transactions and keep the block chain.  These users  
            in the system are called "minors" because they can potentially  
            be rewarded for their participation in the network with the  
            creation of Bitcoins.  Bitcoins are created (mined) as  
            thousands of dispersed computers solve complex math problems.   
            With the solving of the complete math problem Bitcoins are  
            created.  Bitcoin was designed to be a finite resource such as  
            gold or silver, thus the total number that can ever be created  
            is capped at 21 million Bitcoins.  It has been estimated that  
            the last .00000001 of a Bitcoin will be "mined" in 2140.  


           Analysis Prepared by  :    Mark Farouk / B. & F. / (916) 319-3081 


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