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Wyoming Enacts Laws Regulating Blockchain and Cryptocurrency Businesses

Wyoming blockchain regulations may continue to lead the way in enacting laws built for the cryptocurrency industry, rather than trying to fit companies into existing laws and regulations made for traditional financial services.

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.

Contents

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, his approach gaining 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 H.B. 70. House Bill (H.B.) 70 creates a framework for token sales in Wyoming to be classified as utility tokens by complying with certain conditions, including (but not limited to):

  • Registering with the state

  • Not classifying tokens as an investment vehicle

  • Tokens having a consumptive purpose, exchangeable for goods or services or rights thereto

The First Crypto Bank

Another notable Wyoming blockchain bill is H.B. 74. This bill 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. One 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:

  • They can now be a national money transmitter, without having to obtain a license from all fifty states separately.

  • 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, like 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 for companies to test new financial technologies in. 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 may 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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