If you’re a California resident hoping to buy 50 Cent’s next album using Bitcoin, you’re in luck. The most populous U.S. state now recognizes Bitcoin as legal currency, following the approval of Assembly Bill 129 and its subsequent signing into law by Governor Jerry Brown. The new law repeals California Corporations Code Section 107, which prohibited businesses and individuals from circulating alternative currencies.
Sometimes known as a "cryptocurrency," Bitcoin is a virtual payment system that isn’t issued by any government entity, and whose value fluctuates compared to U.S. dollars and other national currencies. Although it isn’t yet widely traded as an alternative to traditional money, some well-known Web companies such as Overstock.com, OKCupid, and Wordpress have begun accepting Bitcoin as payment, thereby avoiding credit-card processing fees on transactions using bitcoins. (The currency unit is known as BTC, or bitcoin with a lowercase “b”.)
The new law not only clears the way for artists to receive legal payments initiating or arriving in California, but also for technology companies relying on Bitcoin to operate there. One example is Cheers, a virtual tip jar allowing individuals to pay musicians with Bitcoin, co-founded by a Stanford University graduate student. Another, launched by Seeqpod founder Kasian Franks, is Songcoin, which aims to be an alternative currency specifically for the music business. Other Bitcoin-related startups include Connecticut-based FanDistro, a marketing platform for artists, which began accepting Bitcoin in February.
A handful of music artists have also begun accepting Bitcoin. Earlier this month, the Atlanta-based heavy rock band Mastodon joined 50 Cent and former Spice Girl Mel B. among the performers who have embraced the digital currency. Snoop Lion has also expressed interest in receiving payment via Bitcoin.
In addition, one Juggalo -- a fan of horror-themed clown rap band Insane Clown Posse -- has also attempted to create a cryptocurrency called “Juggalo Coin,” but it’s not clear whether that effort has taken off. In January, Kanye West sued to block an alleged trademark violation by the creators of Coinye West, another cryptocurrency.
Although Bitcoin was technically illegal in California prior to the new legislation, trading in the cryptocurrency was not generally targeted for prosecution by authorities. Bitcoin did, however, receive further scrutiny after the apprehension in San Francisco of the alleged mastermind behind online drug market Silk Road, which used the digital currency for money laundering. A report on Bitcoin news site Coindesk notes that 48 percent of the world’s Bitcoin-related jobs are in the U.S., with 40 percent of those -- or about 20 percent of those in the world -- in California.
Bitcoin has proven highly volatile compared with the U.S. dollar, with the dollar-to-bitcoin exchange rate ranging above $1,100 last December and below $500 in March. As of this afternoon, the dollar-to-bitcoin exchange rate is roughly $638-to-1, meaning that a dollar amount equal to 50 Cent’s moniker would trade for roughly 0.00078 bitcoin.