The American state of Louisiana has enacted a new crypto regulation that, among other things, prohibits the use of central bank digital currencies (CDBC). 

The new regulation also introduces rules for crypto miners and node operators.

The new crypto regulation of Louisiana against CBDCs

The new crypto regulation in Louisiana is the so-called Blockchain Basics Act, definitively approved on June 19. It will effectively come into force starting in August.

Technically, it is an amendment to a previous regulation that did not specifically concern the crypto and blockchain sector, while obviously the Blockchain Basics Act concerns precisely this sector. 

The text of the new law explicitly mentions both digital assets and cryptocurrencies. 

The same text among other things also explicitly states that it will be forbidden for government authorities to require the use, payment, or testing of the central bank digital currency. 

For the specific precision that with “central bank digital currency” it means precisely a digital currency, a digital medium of exchange or a digital monetary unit of account issued by the Board of Governors of the Federal Reserve System (Fed) or by a federal agency, and that is made directly available to the consumer by such entities, or that is processed or validated directly by such entities. 

From this definition, the text excludes the digital versions of the already existing legal tender, or those issued by private entities. 

Louisiana: The ban of CBDC on the new crypto regulation

The paragraph dedicated to the CBDC is actually quite sparse. 

In fact, it only states that the use and testing of the central bank’s digital currency by government authorities is prohibited. 

Furthermore, it specifies that in the State of Louisiana, government authorities will neither accept nor require payments using the central bank digital currency, and they will not be able to participate in any test of the central bank digital currency of the Fed or any branch or agency of the federal government.

It would seem like a definitive statement from the masses banning the US CBDC even before it is created, but the fact that it was previously specified that digital versions of already existing legal tender currency should be excluded from the definition of CBDC perhaps leaves some room for maneuver. 

Obviously this exception refers to the current digital currency, which is just a digital version of the normal fiat currency already in use for a very long time. 

In this text for central bank digital currency, it actually means a new one, that is, a natively digital version and not collateralized in dollars. Instead, the current digital versions of the legal tender of the USA are in all respects collateralized in dollars. 

Such difference, however, may seem subtle, so it is not to be excluded that in the future a solution could be found to allow Louisiana to adopt the digital dollar as well. 

Mining

Another topic addressed by the Blockchain Basics Act is crypto mining. 


In particular, the State of Louisiana does not like mining companies owned by foreign entities. In fact, this new regulation prohibits foreign entities from acquiring or maintaining any participation in crypto mining operations conducted within the State.

So crypto mining is accepted, provided it is carried out by US companies. 

To achieve this, it mandates that, starting from the first of August, the mining companies currently engaged in the extraction of criptovalute in Louisiana, and controlled by foreign companies, will have a one-year window to get rid of foreign partners, who will have to completely transfer their shares to US companies. 

To achieve this, the Blockchain Basics Act provides for significant penalties that can reach up to 1 million dollars or 25% of the foreign entity’s stake. 

The nodes

The Blockchain Basics Act has also legislated on the holders of blockchain nodes. 

First of all, the text defines who the so-called node operators are, and what their role is within a blockchain network. It also specifies that, although nodes play a crucial role in maintaining a blockchain, they do not have the authority to alter or decide the outcome of transactions initiated by users.

Blockchain nodes are defined as computational devices that communicate with other similar devices or with participants in the blockchain ecosystem to maintain the consensus and integrity of that same blockchain, creating and validating transaction blocks. 

So in fact the new law says little about it, except that the nodes do not exercise discretion over user transactions. 

This in fact clarifies that if within a blockchain there are nodes capable of altering or deciding the outcome of user transactions, the network cannot be defined as a true blockchain. 

The consequences

The only concrete and immediate consequence of this law seems to be the obligation for foreign companies to sell all their shares of crypto mining companies operating in Louisiana to U.S. entities. 

Furthermore, in the event that the Fed were to concretely initiate the project of a natively digital dollar, Louisiana would completely cut itself off from it at first. 

One must not forget that Louisiana is certainly not one of the most advanced states in the USA, and it is also one of the poorest. 

Moreover, he is also one of the most traditionalist, and attached to his own origins. 

Finally, in November there are the elections, with which not only the new president of the United States of America will be chosen, but also a part of the congress will be renewed. It is definitely likely that this law released at this moment also has a strong propagandistic component.