South Carolina lawmakers have passed a bill that bans central bank digital currencies (CBDCs) within the state while simultaneously establishing legal protections for cryptocurrency users, developers, and Bitcoin miners. The legislation, approved this week, positions South Carolina as one of the first states to explicitly outlaw a U.S. CBDC at the state level.
What the law does
The law prohibits any state agency or political subdivision from accepting or requiring the use of a CBDC as a form of payment. It also bars state entities from participating in any CBDC pilot programs. Separate provisions shield crypto users from discriminatory utility rate increases, block local ordinances that would effectively ban crypto mining, and clarify that blockchain developers are not money transmitters unless they hold customer funds.
The move is a direct counter to federal CBDC exploration. While the Federal Reserve has not yet committed to a digital dollar, several pilot projects have drawn scrutiny from state lawmakers concerned about privacy and state preemption. South Carolina's law effectively tells Washington that if a CBDC does come, it won't be welcome in the state. The protections for miners and developers also create a carve-out from burdensome licensing regimes that have stymied crypto businesses in other states.
Reception and next steps
The bill passed with bipartisan support in both chambers. Governor Henry McMaster has not publicly commented on the legislation, but the bill's sponsors say they expect it to be signed. Once enacted, the CBDC ban takes effect immediately, while the miner and developer protections kick in 90 days later. The law does not affect existing state money transmission laws for exchanges or custodial services—only self-hosted wallets and non-custodial software developers are exempt.
