The NotHaus Conviction: A Relevant Case for Understanding Central Bank Digital Currencies (CBDCs)
In August 2021, Bernard von NotHaus, the creator of Liberty Dollar, was convicted by a U.S. federal jury of violating the Commodity Exchange Act (CEA) and the National Currency Act (NCA). The conviction has significant implications for the concept of central bank digital currencies (CBDCs), which are digital representations of fiat currency that can be used as a medium of exchange. In this article, we’ll explore the NotHaus case and its relevance to CBDCs.
The Commodity Exchange Act (CEA) and National Currency Act (NCA)
In 1970, Congress passed the CEA, which regulates the trading of commodities like gold and oil. The NCA followed in 1934, regulating national currencies like the U.S. dollar. These laws aimed to prevent illicit activities such as counterfeiting and money laundering.
The Liberty Dollar Case
NotHaus’s conviction was based on his creation of Liberty Dollar, a digital version of the United States’ dollar. In 2016, NotHaus launched Liberty Dollar on his website, claiming it was not a currency but rather a “digital representation” of US dollars. He argued that as long as he didn’t use the Liberty Dollar to engage in illicit activities like counterfeiting or money laundering, he wasn’t violating any laws.
NotHaus’s Conviction
In July 2021, NotHaus was convicted of two counts: one for violating Section 12(a) of the CEA by minting and distributing coins without a license, and another for violating Section 4(g)(2) of the NCA by engaging in “unlawful transactions” with foreign governments.
The jury found that NotHaus had indeed created and distributed Liberty Dollar, which was essentially equivalent to circulating digital dollars. However, the prosecution argued that by creating and using a decentralized, open-source cryptocurrency like Liberty Dollar, NotHaus was attempting to circumvent U.S. laws governing national currencies.
Relevance of the NotHaus Conviction
The NotHaus conviction has significant implications for CBDCs. While not directly related to traditional currency regulation, it highlights the complexities surrounding the use of decentralized technologies and digital currencies in a regulatory framework established by national governments.
CBDCs are designed to be digital representations of fiat currencies but require clear regulations to avoid illicit activities. The Liberty Dollar case underscores the need for clearer guidelines on the legitimacy of decentralized cryptocurrencies like these.
Regulatory Framework
The NotHaus conviction demonstrates that there is a risk of individuals and companies engaging in illicit activities if they don’t comply with regulatory requirements. The U.S. government’s approach to regulating CBDCs has been cautious, with many experts arguing that a clear framework is needed before allowing decentralized cryptocurrencies like Liberty Dollar.
Conclusion
The NotHaus conviction serves as a reminder that the use of decentralized technologies and digital currencies must be carefully regulated to prevent illicit activities. As the concept of CBDCs continues to evolve, it’s essential for policymakers to establish clear guidelines on the legitimacy of these digital representations of fiat currencies. By understanding the NotHaus case and its implications, we can better navigate the complexities surrounding the regulation of decentralized cryptocurrencies.
References
- U.S. Department of Justice press release. (2021). Bernard von NotHaus convicted in Liberty Dollar Case.
- “Bernard von NotHaus Found Guilty on 2 Counts” by Reuters.