Last year, the state of Wyoming assembled its Blockchain Task Force, whose goal was to pass legislation to help make the jurisdiction an attractive choice for industry startups.
Dubbed the “Delaware of digital asset law,” a reference to Delaware’s lead in corporate law, Wyoming now has 13 laws in the books and 8 more proposed for 2020, putting the state ahead of more than a dozen others mulling crypto and blockchain-related legislation.
Wyoming’s Blockchain Task Force
In discussing what the Blockchain Task Force accomplished during its tenure, Caitlin Long, 22-year Wall St. veteran, crypto/blockchain advocate and expert, and former task force member, likes to use a software analogy:
“Wyoming released a comprehensive, open-source operating system (i.e., the legal framework including 13 enabling laws + 8 more bills proposed for 2020), on top of which users are able to build applications (i.e., blockchain businesses).”
Long, who discovered Bitcoin in 2012, has become an integral supporter of the crypto community in the US. Having experienced firsthand the going-ons of Wall St., she was impressed by the security provided by a blockchain network, and the fact that digital currencies were a financial asset that could be meticulously tracked and could not be lost within financial institutions. On being introduced to the technology: “It lifted a cloud off my shoulder,” Long said. “It made me very optimistic.”
Despite the state’s initial success, Wyoming is far from finished. There are 8 bills proposed for next year’s legislative session that already have committees that have agreed to sponsor them, meaning they have a strong chance of becoming law. Next, with the job of the Task Force complete, the state legislature is set to replace it with something called a select committee.
Long explains that a select committee can be even more responsive to the blockchain industry’s future needs and challenges because it will be able to sponsor legislation directly, while the Task Force could only propose legislation and had to scramble to find sponsors which was “a time-consuming extra step in the process that introduced risks.”
Breakdown of Laws
Here are some of highlights on Wyoming’s newest blockchain laws, as outlined by Long in Forbes:
Recognizes direct property rights for individual owners of digital assets of all types (virtual currencies, digital securities and utility tokens) and applies the super-negotiability rules of commercial law to virtual currencies — which foster their liquidity — by applying the very same rules that apply to money.
Creates a fintech sandbox to provide regulatory relief to financial innovators from existing laws for up to 3 years.
Sets up a new type of state-chartered depository institution to provide basic banking services to blockchain and other businesses. The bank is required to have 100% reserves, cannot lend, is for business depositors only, and FDIC insurance is optional. Such banks could be operating as soon as March 31, 2020.
Authorizes the first true “qualified custodian” for digital assets which is a bank. Wyoming banks can start such operations as soon as September 1, 2019. According to Long, Wyoming’s digital asset custodians will stand out above all others because they “will respect the direct ownership nature of digital assets.” These new custodians won’t be like traditional securities custodians, because for a Wyoming-based custodian investors will still directly own their digital assets under custody as a bailment, which means they retain direct ownership while merely giving up control.