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Wyoming Enacts Laws Regulating Blockchain and Cryptocurrency Businesses

Wyoming’s blockchain regulations have led the way toward enacting laws for the cryptocurrency industry in the U.S.

Gemini-Wyoming Enacts Laws Regulating Blockchain and Cryptocurrency Businesses

Summary

With close collaboration between lawmakers and industry experts, Wyoming has enacted multiple crypto bills that seek to clarify the existing regulatory environment surrounding  cryptocurrency businesses. To date, Wyoming has passed more than a dozen blockchain-focused laws in connection with this effort.

Wyoming Blockchain Bills 

Caitlin Long, a former Morgan Stanley executive and University of Wyoming alumna, took an interest in the state’s cryptocurrency regulatory environment after running into legal roadblocks when trying to donate bitcoin to her alma mater.

Long took her knowledge and passion for crypto directly to state legislators and was joined by other entrepreneurs along the way. They found a champion in-state representative Tyler Lindholm, who shaped potential legislation as a way to replace state income lost by the underperforming coal industry, and this approach gained favor with his colleagues.

While some of the laws passed by the Wyoming state legislature are procedural in nature, here we cover those most relevant to you as a consumer or blockchain entrepreneur.

Utility Tokens

During the 2017 Initial Coin Offering (ICO) boom, the Securities and Exchange Commission (SEC) began publishing guidance on whether ICOs violated securities law. One Wyoming crypto bill is House Bill 70 (H.B. 70), which creates a framework for cryptocurrency token sales in Wyoming to be classified as utility tokens when they comply with certain conditions, including but not limited to:

  • registering tokens with the state;

  • not classifying tokens as an investment vehicle;

  • and giving tokens a consumptive purpose, exchangeable for goods or services or the rights thereto.

The First Crypto Bank

Another notable Wyoming blockchain bill is H.B. 74, which was the bill that allowed Kraken Financial to receive a state bank charter.

Under H.B. 74, digital asset companies can apply to become special purpose depository institutions (SPDI), a type of bank. A major difference between SPDIs and traditional banks is the type of lending they engage in. Federally chartered banks must comply with additional regulations as they traditionally lend out customer money and hold less in reserve than the customer initially deposited. This practice is called “fractional reserve banking.” As an SPDI, Kraken Financial and others who get approved will be required to hold all assets deposited with them.

This distinction addresses a number of problems for the cryptocurrency industry. Many companies have had a difficult time getting banks to hold their funds and digital assets and to provide banking services.

Kraken Financial CEO David Kinitsky outlined a few reasons why Kraken was interested in becoming an SPDI.

  • SPDIs can now be a national money transmitter, without having to obtain a license from those states that require one.

  • They can offer banking and qualified custody for digital assets for any company and integrate with federal payment systems.

  • They can create new types of financial products for their customers, such as cryptocurrency-backed debit cards, retirement accounts, and wealth management services.

The Future of Wyoming Blockchain Laws

Tyler Lindhom lost his 2020 election and will no longer hold a seat in the state legislature. However, two key regulations were put in place to further Wyoming’s leadership in this space: H.B. 57 and H.B 27.

H.B. 57 creates a regulatory sandbox where companies may test new financial technologies. H.B. 27 establishes the “Select Committee on Blockchain, Financial Technology, and Digital Innovation,” which works with government officials to understand and implement current laws appropriately, while introducing new laws going forward. Taken together, these two laws establish a foundation for future Wyoming blockchain laws and innovation in the state.

Wyoming blockchain regulations could continue to lead the way in enacting laws built for the cryptocurrency industry, rather than trying to fit companies into existing financial regulatory frameworks.

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