On November 30th 2018, Wyoming legislators voted to approve a groundbreaking bill which legally allows for the integration of traditional banking and blockchain technology. Despite ‘heavy opposition’ from the banking industry, the state of Wyoming has once again set itself apart as a visionary of the benefits embedded in blockchain innovation.
Wyoming Expands its Reputation as a Blockchain Haven
Wyoming has a well-known reputation for welcoming blockchain technology with open arms. Recently, a committee of legislators strengthened that reputation by voting 13-1 to approve a bill which legally permits banks to offer various financial services that include blockchain-based assets.
Legislators met in a ‘Blockchain Task Force’ committee meeting to discuss three bills:
- 19LSO-0045 v0.6 Banking Technology and Stock Revisions
- 19SLO-0048 v0.7 Financial Technology Sandbox
- 19SLO-0055 v0.8 Special Purpose Depository Banks
Perhaps the most significant was 19SLO-0055. The bill states that banks which handle blockchain-based assets constitute a new category of banking: the ‘Special Purpose Depository Bank’. Banks that fall under this category are susceptible to the applicable federal and state laws of any other bank, except for one major aspect: they are legally allowed to deal with blockchain-based assets.
The Details of Wyoming’s Blockchain Bill Explained
Section 1 of the 46-page bill reads:
(a) The legislature finds the following:
- The rapid innovation of blockchain technology, including the growing use of virtual currency and digital assets, has resulted in many blockchain innovators being unable to access secure and reliable banking services, hampering development of blockchain services and products in the marketplace;
- Federally insured financial institutions are not generally permitted to manage accounts in virtual currency or hold other digital assets;
- Blockchain innovators have greater compliance challenges with federal customer identification, anti money laundering and beneficial ownership requirements because of the complex nature of these obligations and the unfamiliarity of regulators with blockchain innovators’ businesses;
- These intricate obligations have resulted in many financial institutions in Wyoming and across the United States refusing to provide banking services to blockchain innovators and also refusing to accept deposits in United States currency obtained from the sale of virtual currency or other digital assets;
- Compliance with applicable federal and state laws is critical to ensuring the future growth and reputation of the blockchain and technology industries as a whole;
- Most financial institutions today do not have the expertise or familiarity with the challenges facing blockchain innovators which is required to provide secure and reliable banking services to these innovators;
- A new type of Wyoming financial institution that has expertise with customer identification, anti money laundering and beneficial ownership requirements could seamlessly integrate these requirements into its operating model; and
- Authorizing special purpose depository banks to be chartered in Wyoming will provide a necessary and valuable service to blockchain innovators, emphasize Wyoming’s partnership with the technology and financial industry and safely grow this state’s developing financial sector.
News of the bill’s approval was broadcasted via Twitter by Caitlin Long, a Harvard graduate and 22 year Wall Street veteran with companies such as Morgan Stanley. Long, a blockchain advocate and Wyoming native, is co-founder of the Wyoming Blockchain Coalition. She excitedly told her followers,
“BREAKING! #Wyoming legislative committee passed #blockchain #bank bill 13-1 over heavy opposition from the banking industry. Congratulations and thanks to all out supporters!”
Anthony Pompliano, a well-known blockchain advocate, responded to the news with the following:
“Keep pushing the pace. One step at a time…”
Wyoming’s History in Legally Supporting Blockchain Development
Earlier this year, Wyoming passed five additional bills which support blockchain technology:
- HB 19 — exempts virtual currencies used in Wyoming from various money transmitter laws and regulations
- HB 70 — protects individuals who develop, sell, or facilitate the exchange of blockchain-based tokens from certain securities and money transmission laws
- HB 101 — allows for the maintenance of Wyoming-based corporate records to be managed via blockchain technology
- HB 126 — modifies the state’s corporate code to allow for the formation of ‘series LLCs’. The bill was designed to provide an advantageous jurisdiction concerning securities formation
- SF 111 — claims virtual currency is not subject to property tax in Wyoming
The increase in legislative support involving the integration of blockchain technology and finance has been popularly received by blockchain supporters across the globe.
Notably, Wyoming’s approval of the historic bill has come at a time when tense relations have developed between various regulatory bodies in the United States and blockchain innovators.
The increased regulatory enforcement has pushed some to cancel ICOs, and divert to Security Token Offerings (STOs) out of regulatory concern.
STOs differ from ICOs in many ways, the most known is their legal compliance when compared to the regulatory ambiguous ICO. Security tokens simply follow the existing securities laws established by the applicable regulatory bodies— which typically depend on the jurisdiction of the company and its investors.
Despite the current regulatory hardships, actions like Wyoming’s recently passed bill certainly look to establish the state as the US leader in regulatory support for blockchain innovation.
What do you think of the recent bill passed by Wyoming legislators? Will other states follow suit, or will Wyoming solidify itself as the blockchain haven in the United States? We want to know what you think in the comments below.