Kansans could start using gold and silver as currency to cover debts, taxes and state fees if the Kansas specie legal tender act is passed.
Twenty-seven Kansas representatives sponsored the bill, which advocates say allows people to protect themselves from inflation. Several of the proponents also spoke broadly about their belief that gold is a superior form of currency compared to fiat.
“Honestly it seems a little bit odd to me that we’re seeking to authorize gold and silver as legal tender, because it was used for thousands of years as legal tender to pay bills, to trade, what have you,” said Rep. Michael Murphy, R-Sylvia. “It also backed our currency up until 1973.”
Before the United States abandoned the gold standard, inflation was lower on average but more volatile than it has been under modern fiat currency, according to the National Bureau of Economic Research. Financial experts don’t recommend gold as a short-term investment but say it can be useful in maintaining real value during market volatility.
How people buy gold changed in the digital age, though, and now rather than a cache of gold buried in a back yard people may now buy stakes in gold through a vendor. Two such vendors spoke in favor of the bill.
The bill wouldn’t force people to accept gold in a transaction, but wouldn’t tax it when it’s used in exchange except when it’s used to cash out from certain retirement accounts that invest in gold. It would also place power in the state treasurer to regulate the state’s gold currency system and create or hire a third-party to establish and run a gold depository.
“The bill raises many questions for our office, especially the cost to administer the program,” State Treasurer Steven Johnson said in neutral written testimony.
Johnson said he’s concerned about how the bill would interact with federal banking regulations, the potential high cost of running the program and uncertainty over how many Kansans would actually participate in the program — which would drive up costs if few Kansans bought gold.
The Kansas Bankers Association and the Kansas Credit Union Association opposed the bill, with the KBA saying the system Kansas would get into with this bill is complex, prone to security vulnerabilities and vests too much power into one elected official.
“There are layers of security, processing speed, reliability and even customer service that all have to be perfected,” Alex Orel, senior vice president of government relations for the KBA, said in written testimony. “Even if you believe there is a role for the government to play in the creation of its own state level asset backed digital currency, do you think that power should be concentrated into one elected official?”
Kansas is one of over 20 states considering recognizing gold and silver as legal tender, with Arizona and Arkansas already axing taxes on gold when used as a means of exchange. Both a House and Senate version of the bill had committee hearings on Monday.