Congress's Power to Regulate Currency

The Constitution grants Congress authority over the currency of the United States, encompassing the powers to mint money and determine its value. Additionally, Congress has the authority to establish banks and manage the circulation of money. A corresponding power to the creation of currency is the regulation of counterfeit currency.

The Powers of Congress: Article I, Section 8

Article I, Section 8 of the Constitution enumerates Congress’s powers. The powers regarding currency include the following:

"The Congress shall have the power to . . .

[5] To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

[6] To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;"

Congress also has the power to regulate commerce with foreign nations and between the several states. Moreover, it can borrow money on credit for the United States.

Congress and Currency

Article I, Section 8, Clause 5 is known as the coinage clause. It gives Congress the exclusive power to coin money. The Supreme Court has also interpreted clause 5 as giving Congress the sole authority to regulate every aspect of United States currency.

The Supreme Court case McCulloch v. Maryland (1817) also gives Congress the power to charter banks. In addition, it can give banks the power to issue circulating notes (e.g., coins, banknotes, and government notes).

The Supreme Court has ruled that Congress can levy taxes on banknotes issued by state banks or “municipal corporations.” This allows Congress to restrain currencies not issued under its own authority.

Counterfeiting

Article I, Section 8, Clause 6 is known as the counterfeiting clause. The Supreme Court has interpreted it to mean that Congress prohibits the creation of counterfeit coins or money. However, clause 6 does not ban the use of counterfeit money in financial transactions. (Fox v. Ohio (1847)).

As the Constitution Annotated notes, the Supreme Court has ruled that the counterfeiting clause does not limit the power of the states. Indeed, states can punish people or entities that use counterfeit money.

Congress can also pass federal laws that punish the importation and use of counterfeit money. In United States v. Marigold (1850), the Court wrote that Congress’s ability to coin money includes “the correspondent and necessary power and obligation to protect and to preserve in its purity this constitutional currency for the benefit of the nation.”

Related Powers

The coinage and counterfeiting clauses are related to several other powers of Congress. These include the following:

• Article I, Section 8, Clause 18 - The “necessary and proper clause”
• Article I, Section 10 - “No state shall . . . coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; . . .”

The Necessary and Proper Clause

As noted above, the Supreme Court has interpreted the counterfeiting clause as allowing Congress to punish the use of counterfeit money. It has this power, in part, because of the necessary and proper clause. The clause allows Congress to enact “all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers and all other Powers vested by this Constitution in the Government of the United States . . .”

The necessary and proper clause makes the counterfeiting clause unnecessary. Whether the clause exists or not, the necessary and proper clause allows Congress to pass federal laws necessary for carrying out its powers. Therefore, the federal government can enumerate and punish crimes like using counterfeit money.

Article I, Section 10

Article I, Section 10 prohibits states from issuing “bills of credit,” like promissory notes. It also prevents states from coining money and using anything other than gold or silver coins to make legal tender.

The Legal Tender Cases held that paper money was constitutional. The cases involved the constitutionality of the Legal Tender Act of 1862. The federal law allowed the government to issue paper money. An 1869 decision held that the Act did not allow people to use paper money to satisfy pre-existing debts.

However, the Legal Tender Cases overruled the 1869 decision. The cases allowed people to use Treasury notes (i.e., paper money) to pay pre-existing debts.