South Dakota Governor Kristi Noem vetoed House Bill 1193, which was intended to amend the state’s Uniform Commercial Code (UCC) to specifically exclude cryptocurrencies and other digital assets from the definition of money. The bill, which had already been approved by the state legislature, sought to provide greater clarity and legal certainty to companies that operate digital assets in South Dakota.

In her veto notice to state House Speaker Hugh Bartels on March 9, Governor Noem argued that the bill would put South Dakota at a disadvantage compared to other states that have embraced cryptocurrency. She said that excluding cryptocurrencies as money would make it difficult to use and could hurt the state’s economy.

Additionally, Governor Noem expressed concern that the bill could pave the way for future overreach by the federal government in issuing a digital dollar. She believes that by excluding cryptocurrencies from the definition of money, the bill would create a regulatory loophole that could be exploited by the federal government to impose its own digital currency on states.

Governor Noem also noted that the bill’s exception for central bank digital currencies (CBDCs) could undermine the state’s efforts to regulate cryptocurrencies and digital assets. He argued that CBDCs, which are issued and backed by central banks, could potentially displace other digital currencies and become the only viable option for both businesses and consumers.

Governor Noem’s decision to veto the bill has received mixed reactions from the cryptocurrency community. Some have praised her for recognizing the potential of digital assets and for opposing the federal government’s overreach. Others, however, have criticized it for ignoring the risks and challenges that cryptocurrencies pose, including its potential use for illicit activities and its impact on the environment.

In recent years, South Dakota has become a hub for the cryptocurrency and blockchain industries, with several major companies and startups operating in the state. However, the regulatory landscape for digital assets in South Dakota remains uncertain, with legislators and regulators grappling with the complexities and risks of this emerging sector.

Governor Noem’s veto of House Bill 1193 is likely to add more uncertainty and debate to the state’s approach to regulating cryptocurrencies and digital assets. The governor’s concerns about the potential impact of excluding cryptocurrencies from the definition of money and the risk of federal government overreach highlight the need for a nuanced and balanced regulatory framework that balances innovation and security.