Wyoming has been aggressively persistent in their stride towards integrating blockchain technology and new regulations that make innovation possible. The state has created a climate that is enticing to blockchain companies, with big names like Cardano, Kraken, and ConsenSys already getting involved. Now, a company called FreeRange from New Mexico is coming in, but they have a goal in mind – becoming the first digital asset bank in the country.
The Special Purpose Depository Institution bill (HB0074) was signed by Governor Mark Gordon this week, implementing a law that made it possible for Wyoming to host “crypto banks,” which no other state has done yet. Caitlyn Long, a blockchain proponent and an advisor with the Wyoming Blockchain Coalition, explained that the law will hopefully put aside the “horror stories” of crypto startups seeing their liquidity blown away.
Blockchain companies have seen a lot of roadblocks in the banking industry, considering that they are federally regulated and that their policies on cryptocurrencies have been a little unclear. COO Amber Terrasas of FreeRange explained that blockchain companies need to be allowed to hold and use bank accounts to show their validity as a US-based company.
Even though Wyoming brought forth positive legislation for blockchain technology this year, the companies that use it have still been unable to bank anywhere. This blockage causes a separate issue in the companies’ ability to pay withholding taxes and related fees. With so many software and IT developers using blockchain, Terrasas believes that something needs to be done to create the right atmosphere in the banking industry, both statewide and nationwide.
Wyoming is presently the only place for companies in blockchain to bank and store their assets due to the addition of special purpose banks. This type of bank does not make much of a difference to consumers, but they are designed to meet the needs of blockchain-based companies, because they have to keep 102% reserve which is not lent out, as FreeRange CEO Joe Pitluck says.
If FreeRange manages to secure its charter to open the planned bank, it will need to have the 102% reserve, full surety bond, and all insurance, Pitluck explained. With lower capital requirements, more deposits can be accepted with FreeRange and other SPDIs. They will also provide custodial services for institutional investors and their digital assets, considering that the assets have to be held with a third party.
One of the positive regulations that SPDIs will not be subject to is the oversight of the Federal Deposit Insurance Corporation (FDIC), because it will not qualify for the insurance. Without this oversight, the institutions can still operate nationally, but they aren’t treated in the same way that ordinary banks and other high-risk enterprises are.
In Wyoming, the crypto banking law is effective on July 1st, and Pitluck confirmed FreeRange’s intentions of applying first for the charter by the October deadline, which is when the state banking commission must adopt rules for the law. If everything goes as expected, the second quarter of 2020 will see the first crypto bank in the country with FreeRange.