It Is Illegal to Make Coins that will Circulate as Money

Federal law prohibits people from making metal coins “intended for use as current money.”¹  Creation of souvenir coins not intended to act as currency, however, is not illegal.  People have, in fact, recently created coins meant to be used in very small local communities in Marin County, CA.²  Many people buy such coins as souvenirs, and others use them at a handful of local businesses that have agreed to accept them.   Some have argued that such coins are not “intended for use as current money,” because they can only be redeemed at a handful of local businesses.  This may, in fact, be a valid argument, as described below.  It is also important to note that federal law only prohibits the creation of metal coins. Some groups have contemplating making coins from wood, clay, plastic, or other materials.

How Much Flow Does it Take to Make a Current?

One court, examining the legalities of a souvenir-like coin issued in celebration of and for use at local businesses during the Alaska Centennial observance, summarized the meaning of “current money” as follows:³

 “The expression ‘current money’ has been defined as follows in State v. Quackenbush, 98 Minn. 515, 108 N.W. 953, 955 (1906):  ‘Money includes `whatever is lawfully and actually current in buying and selling, of the value and as the equivalent of coin.’ […] ‘Current money’ means money which passes from hand to hand and from person to person and circulates through the community. […] Whatever is intended to, and does actually, circulate as money. […] ‘Current money,’ that which is generally used as a medium of exchange. […].'”⁴

In that particular case, the court leaned heavily away from the idea the coins were intended to circulate as current money.  The court described the facts:

 “The coins were, in part, to carry the following language: ‘Good for One Dollar in Trade at Any Cooperating Business Redeemable at Face Value at the Anchorage Centennial Exposition Site Until December 31, 1967.’ As finally stamped, the coins in part read, ‘Redeemable at Face Value at Anchorage the Air Crossroads of the World.’ There is nothing in either the proposed or final inscription which would indicate to Van Wormer that the Commission intended to use the coins as current money.  […]  Additionally, there was no proof made as to the number of mercantile establishments in Anchorage at which the coins could be redeemed. Similarly, there was a lack of proof as to whether the coins were redeemable wholly or partially in cash. Finally, there was no evidence as to the number of business establishments at which the coins could be used in lieu of cash.”⁵

If other courts follow the above precedent in analyzing the meaning of “current money,” it is likely the two Marin County, CA coins would not be deemed to be in violation of the law.  Because they are redeemable at only a fixed number of local businesses in very small communities, the coins are not likely to be considered “current money.”  This does, however, leave open the question of how the legal system might respond if the coins were to become widely accepted and achieve a high degree of flow.

The Liberty Dollars Case

In 2011, a man named Bernard van NotHaus was convicted of several federal charges in connection with a coin currency he created, called the Liberty Dollar.  The prosecution of this case sent a wave of worry through local currency projects around the country.  However, there were some important difference between van NotHaus’ coins and other local currencies.   The Liberty Dollar coins had a “$” symbol, used the words “dollar,” “USA,” “Liberty,” “Trust in God” (instead of In God We Trust) and looked in design like coins of the national U.S. currency.  According to the FBI, van NotHaus was found guilty on four counts: “making coins resembling U.S. coins; issuing, passing, selling, and possessing Liberty Dollar coins; issuing and passing Liberty Dollar coins intended for use as current money; and conspiring against the United States.”⁶

Here are the four violations that Bernard van NotHaus was convicted of:

1. 18 U.S.C. § 2 – Principals

(a) Whoever commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal.
(b) Whoever willfully causes an act to be done which if directly performed by him or another would be an offense against the United States, is punishable as a principal.

2. 18 U.S.C. § 371 : Conspiracy to commit offense or to defraud United States

3. 18 U.S.C. § 485 – Coins or bars

Whoever falsely makes, forges, or counterfeits any coin or bar in resemblance or similitude of any coin of a denomination higher than 5 cents or any gold or silver bar coined or stamped at any mint or assay office of the United States, or in resemblance or similitude of any foreign gold or silver coin current in the United States or in actual use and circulation as money within the United States; or

Whoever passes, utters, publishes, sells, possesses, or brings into the United States any false, forged, or counterfeit coin or bar, knowing the same to be false, forged, or counterfeit, with intent to defraud any body politic or corporate, or any person, or attempts the commission of any offense described in this paragraph—

Shall be fined under this title or imprisoned not more than fifteen years, or both.

4. 18 U.S.C. § 486 – Uttering coins of gold, silver or other metal

Whoever, except as authorized by law, makes or utters or passes, or attempts to utter or pass, any coins of gold or silver or other metal, or alloys of metals, intended for use as current money, whether in the resemblance of coins of the United States or of foreign countries, or of original design, shall be fined under this title or imprisoned not more than five years, or both.

It is Illegal to Create Currency Worth Less Than $1.00

It is illegal to put into circulation a currency (or to write a check, for that matter), of a value of less than $1.00, which leaves one to wonder whether a local currency or scrip could ever be used to purchase an apple or other inexpensive items.⁷ The purpose of this law was to prevent people from hoarding valuable coins and exchanging with notes valued at less than $1.00. This law is, of course, frequently violated today; Facebook, for example, has created a virtual currency, called Facebook Credits, which are valued at only ten cents each.⁸  In his article about alternative digital currencies, Reuben Grinberg points out that this law, enacted by the Stamp Payments Act, has not been interpreted in a court since 1899, which perhaps means that no one has cared to enforce it.⁹

 

The Sustainable Economies Law Center recommends that 18 U.S.C. § 336 be removed from law in order to enable the creation of currencies with a value of less than $1. While this law is still on the books, it will be difficult to use complementary currencies to purchase small items and to make change.

 

It is Illegal to Materially Alter the Dollar

To promote local re-circulation of money, some groups and business have made use of special stickers and stamps attached to dollar bills.  For example, my local bookstore puts a transparent purple ink stamp on money given to me as change, promising that the bills are worth double their face value if I return and spend the bills at that bookstore.  Bernal Bucks, a neighborhood initiative in San Francisco, created a special sticker to put on $10 bills, which, if spent at participating businesses in the Bernal Heights neighborhood, would earn the spender a discount or other premium.

This brings up the question: Does stamping or putting stickers on U.S. Dollars violate laws against defacing money?  Federal law makes it illegal to deface, mutilate, cut, or cement together dollar bills or other evidence of debt, “with intent to render such bank bill, draft, note, or other evidence of debt unfit to be reissued.¹⁰

It is likely that if a sticker can be easily removed¹¹ or if a stamp has light and transparent ink, it would not be found to be in violation of the law.  It is helpful to note that mutilation of a bill must be done with the intent to prevent it from being reissued or re-circulated.  Most people that stamp or put stickers on dollar bills intend the opposite, and hope that the bill will remain in circulation.

Furthermore what seems to matter is whether the mutilation causes a material change to the meaning of the words on the bill.  In one case that examined this, the court held that “erasing words from an instrument or severing a portion thereof so that its effect is changed is a material alteration and constitutes forgery at common law.”¹²

It is Illegal to Make Things that Look Too Similar to the U.S. Dollar

Many local currencies have actively sought to avoid any claims that they are creating currency that is deceptively similar to the U.S. dollar, as doing so would be illegal.¹³  Burlington Bread, a now inactive currency project in Burlington, Vermont, printed currency that was larger than the U.S. dollar.  The currency, however, fell into disuse, in part, because people had trouble fitting the currency into their wallets or cash registers.  Other currencies have sought to differentiate themselves from the U.S. Dollar by using colorful graphics, words like “hour” or “bucks,” instead of “dollars,” and by explicitly writing on the bill that it is not a U.S. dollar.

Other Relevant laws

18 USC § 491 – Tokens or Paper Used as Money

(a) Whoever, being 18 years of age or over, not lawfully authorized, makes, issues, or passes any coin, card, token, or device in metal, or its compounds, intended to be used as money, or whoever, being 18 years of age or over, with intent to defraud, makes, utters, inserts, or uses any card, token, slug, disk, device, paper, or other thing similar in size and shape to any of the lawful coins or other currency of the United States or any coin or other currency not legal tender in the United States, to procure anything of value, or the use or enjoyment of any property or service from any automatic merchandise vending machine, postage-stamp machine, turnstile, fare box, coinbox telephone, parking meter or other lawful receptacle, depository, or contrivance designed to receive or to be operated by lawful coins or other currency of the United States, shall be fined under this title, or imprisoned not more than one year, or both.

(b) Whoever manufactures, sells, offers, or advertises for sale, or exposes or keeps with intent to furnish or sell any token, slug, disk, device, paper, or other thing similar in size and shape to any of the lawful coins or other currency of the United States, or any token, disk, paper, or other device issued or authorized in connection with rationing or food and fiber distribution by any agency of the United States, with knowledge or reason to believe that such tokens, slugs, disks, devices, papers, or other things are intended to be used unlawfully or fraudulently to procure anything of value, or the use or enjoyment of any property or service from any automatic merchandise vending machine, postage-stamp machine, turnstile, fare box, coinbox telephone, parking meter, or other lawful receptacle, depository, or contrivance designed to receive or to be operated by lawful coins or other currency of the United States shall be fined under this title or imprisoned not more than one year, or both.

18 U.S.C. § 333 : US Code – Section 333: Mutilation of national bank obligations

Whoever mutilates, cuts, defaces, disfigures, or perforates, or unites or cements together, or does any other thing to any bank bill, draft, note, or other evidence of debt issued by any national banking association, or Federal Reserve bank, or the Federal Reserve System, with intent to render such bank bill, draft, note, or other evidence of debt unfit to be reissued, shall be fined under this title or imprisoned not more than six months, or both.

Relevant Cases

• Keese v. Zerbst, 88 F. 2d 795 (10th. Cir. 1937).

Relevant Articles

• Black’s Law Dictionary, Definition of “current money” and “legal tender.”
• Grinberg, Rubin, Bitcoin – An Innovative Alternative Digital Currency, (Dec. 9, 2011), Hastings Science & Tech. L. J. Vol. 4, p. 160.
• Smith B., Wilson R., How Best to Guide the Evolution of Electronic Currency Law, 46 Am. U. L. Rev. 1105 (1997).
• Federal Bureau of Investigation, Defendant Convicted of Minting His Own Currency, March 18, 2011.
• Good B., Federal Reserve Bank of Cleveland, Private Money: Everything Old is New Again, April 1, 1998.