Wyoming Enacts Laws Regulating Blockchain and Cryptocurrency Businesses


Wyoming’s blockchain regulations have paved the path for other states to pass legislation governing the bitcoin business.

Summary

Wyoming has approved various crypto measures that seek to explain the present regulatory environment around bitcoin businesses, thanks to tight coordination between politicians and industry experts. In tandem with this initiative, Wyoming has passed more than a dozen blockchain-related laws.

Contents

Wyoming Blockchain Bills 

Caitlin Long, a former Morgan Stanley executive and alumna of the University of Wyoming, became interested in the state’s cryptocurrency regulatory climate after encountering legal snags while attempting to contribute bitcoin to her old institution.

Long took her knowledge and enthusiasm for crypto to state legislators, where she was joined by other entrepreneurs. They found a champion in-state representative Tyler Lindholm, who structured possible legislation as a method to recover state revenue lost due to the underperforming coal business, and his colleagues liked it.

While some of the Wyoming state legislature’s legislation are procedural in nature, we’ll focus on the ones that are most important to you as a consumer or blockchain startup.

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Utility Tokens

The Securities and Exchange Commission (SEC) began issuing recommendations on whether initial coin offerings (ICOs) violated securities law during the 2017 ICO boom. House Law 70 (H.B. 70) is a Wyoming crypto bill that establishes a framework for cryptocurrency token sales in Wyoming to be categorized as utility tokens if certain conditions are met, 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.

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The First Crypto Bank

H.B. 74, which allowed Kraken Financial to get a state bank charter, is another noteworthy Wyoming blockchain bill.

Digital asset companies can apply to become special purpose depository institutions (SPDIs), which are a sort of bank, under H.B. 74. The type of lending SPDIs and traditional banks participate in is a significant distinction. Because they generally lend out customer money and maintain less in reserve than the customer initially put, federally authorized banks are subject to additional regulations. This is known as “fractional reserve banking.” Kraken Financial and other SPDIs will be required to hold all assets deposited with them if they are approved.

This distinction helps the cryptocurrency sector solve a variety of issues. Many businesses have struggled to find banks willing to keep their finances and digital assets and provide banking services.

Kraken Financial CEO David Kinitsky discussed a few of the reasons why the company wanted to join the SPDI.

  • SPDIs can now operate as a nationwide money transmitter without the need for a license in the states that require it.
  • They may provide any organization with banking and qualified custody of digital assets, as well as integration with government payment systems.
  • They can offer their consumers new financial products such as cryptocurrency-backed debit cards, retirement accounts, and asset management services.

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The Future of Wyoming Blockchain Laws

Tyler Lindhom was defeated in his bid for re-election in 2020, and he will no longer be a member of the state legislature. H.B. 57 and H.B. 27 are two major rules that have been enacted to further Wyoming’s leadership in this area.

H.B. 57 establishes a regulatory sandbox in which businesses can experiment with innovative financial technology. H.B. 27 creates the “Select Committee on Blockchain, Financial Technology, and Digital Innovation,” which collaborates with government officials to better understand and apply current laws while also proposing new legislation in the future. These two bills, taken combined, lay the groundwork for future Wyoming blockchain legislation and innovation.

Wyoming blockchain legislation may continue to set the standard for implementing laws tailored to the cryptocurrency industry rather than attempting to fit enterprises into existing financial regulatory frameworks.