Noem vetoes the bill, which she says excludes crypto

PIERRE, SD (KELO) — The governor has vetoed a fourth bill the South Dakota Legislature approved in the 2023 session.

The latest target is HB1193 which would make various changes to South Dakota’s commercial code.

Governor Kristi Noem specifically refers in her veto letter dated March 9 to wording that would define money but exclude cryptocurrency.

She also points out that the legislation would allow “central bank digital currencies” – CBDCs – to be treated as money.

The letter lists two objections.

“First, by expressly excluding cryptocurrencies as money, it would become more difficult to use cryptocurrency. By unnecessarily limiting this freedom, HB1193 would put South Dakota citizens at a business disadvantage, it said.

Her second reason is that treating CBDCs as money “opens the door to the risk that the federal government could more easily adopt a CBDC, which could then become the only viable digital currency.”

The governor’s letter notes that a government-backed digital currency has not been created at this time. “It would be irresponsible to create regulations that regulate something that does not yet exist. More importantly, South Dakota should not open the door to a potential future handover from the federal government, the letter said.

The South Dakota Bankers Association and the Independent Community Bankers of South Dakota supported the bill’s passage. So did the South Dakota Retailers Association, the South Dakota Chamber of Commerce and Industry, the Sioux Falls Chamber and the South Dakota Trust Association.

Karl Adam is president of the South Dakota Bankers Association. “We are disappointed. We disagree with the points she said in her veto message, he tells KELOLAND News.

Adam said that virtual currencies are not defined as money because they are not physical objects and cannot be owned for lending purposes. But, he said, they are defined elsewhere in the legislation as a verifiable electronic record, or CER.

Not allowing the legislation to move forward would be a disadvantage to a person looking to get credit, according to Adam. That’s because, without the legislation, cryptocurrency would not be recognized as an asset that can be used to obtain credit, he said.

Carla Reyes, assistant professor of law at Southern Methodist University, tweeted Friday morning that the veto was counterproductive. “If the goal of (the governor’s) veto was to make it easier to use #bticoin in trade the exact opposite was achieved. The veto means that bitcoin and cryptocurrencies remain general intangible assets in South Dakota, which hurts its tradability and transferability as a legal matter,” she said.

A group of lawmakers known as the South Dakota Freedom Caucus has been trying to stop the bill and released a statement Friday morning praising the governor’s efforts to block the legislation.

“At our urging, thousands of South Dakotans have called and written the governor warning her of the dangers of this legislation, and she has truly listened to the voice of the people,” the statement said. “We will now focus on encouraging our colleagues in the Legislature to uphold her veto, and we are asking our citizens to once again make their voices heard on this matter. We are ready to reconsider this legislation without the language that attacks our liberties at a later date.”

Overriding a veto requires a two-thirds majority in each chamber: 47 in the House and 24 in the Senate. The House had passed the bill 49-17 and the Senate 24-9.

KELOLAND has also requested comment from the bill’s lead sponsor, Republican Representative Mike Stevens.

The bill reflected model language from the national Uniform Law Commission. South Dakota’s delegation includes a former University of South Dakota law dean, Thomas Geu, and six former or current state legislators who are lawyers: Michael DeMersseman of Rapid City, Republican Sen. Michael Diedrich, Marc Feinstein of Sioux Falls, Brian Gosch of Rapid City , Gene Lebrun of Rapid City and Republican Rep. Will Mortenson.

Noem in the veto letter stated that South Dakota should not rush to adopt the changes. “The uniform provisions may be adjusted as needed after other states experiment with this legislation,” her letter said.