States aren't allowed to coin money. They can issue gold and silver, though, and some are talking about actually doing it.
Why are so many state legislators beginning to call for issuance of a form of gold money?
The Constitution prohibits states from coining money but allows them to make “gold and silver Coin a Tender in Payment of Debts.” By prohibiting everything except “gold and silver Coin” the Constitution clearly considers gold and silver coinage to be legitimate, no matter who issues it.
States haven’t issued currency in any form for more than a hundred years. So why now? Disgust is probably the answer. Various state legislators are disgusted by the federal government’s promiscuous dollar-printing. Accordingly, legislators in a dozen states are contemplating legislation to issue gold or silver-based currencies, including Utah, South Carolina, Virginia and New Hampshire.
The transcript of the debates in the original Constitutional Convention shows that the attitude of the Founders toward paper money was one of contempt. One delegate, Roger Sherman, called for the insertion of an absolute prohibition against states issuing their own paper money.
Sherman’s argument prevailed, as the Founder’s decided that the states would not possess the power to “emit bills of credit, nor make any thing but gold and silver coin a tender in payment of debts” making these prohibitions absolute…
As for the federal government, the earliest drafts of the Constitution included language permitting the federal government to issue unbacked paper money. But this language would not survive the final draft.