Wyoming Releases New Comprehensive Blockchain Legislation Details as Crypto Bill Makes Its Way into Legal System
New details have emerged about the state of Wyoming’s upcoming blockchain legislation.
As discussed by Caitlin Long on Twitter earlier today, the state of Wyoming is ready to pass comprehensive legislation governing blockchain technology.
“My native state is about to do bigger things for #blockchain, & the sector is about to pay Wyoming back big-time,” explained Caitlin Long on Twitter earlier today.
1/ TWEETSTORM about #Wyoming’s BIG REVEAL. This is long & info-packed, so buckle in. My native state is about to do bigger things for #blockchain, & the sector is about to pay Wyoming back big-time. Win-win! @Tyler_Lindholm @SenatorDriskill @TraceMayer @ForbesCrypto pic.twitter.com/gP4oWtTmJj
— Caitlin Long 🔑 (@CaitlinLong_) January 18, 2019
Caitlin Long is a volunteer and co-founder of the Wyoming Blockchain Coalition. The organization has been working alongside legislators and senators to pass the blockchain and crypto-friendly bill. If the bill is passed, it could lead to a bright future for crypto and blockchain in the state.
Specifically, the state of Wyoming has passed a bill that would clarify the legal status of cryptocurrencies. The bill classifies cryptocurrencies as money, for example, and allows banks – yes, ordinary banks – to be legal custodians of cryptocurrencies. Here’s how the story was reported by Forbes:
“In a significant move for the advancement and legitimization of cryptocurrencies and blockchain businesses in the United States, Wyoming has introduced a bill that aims to clarify the legal position of digital assets, as well as offer digital asset custody through banks rather than financial institutions.”
Under the new bill, Wyoming will classify digital assets into three different categories:
- Digital Securities
- Digital Assets
- Virtual Currencies
By introducing this bill, the state of Wyoming is effectively giving cryptocurrencies the same treatment as money within the state.
The classifications aren’t new; instead, they are being applied to digital assets to offer clarification for where these digital assets stand under the law. Blockchain companies seeking to do business in Wyoming will be able to operate knowing that cryptocurrencies have legal, qualified status within the state.
Meanwhile, in other states, cryptocurrencies continue to occupy a “grey area” of the law. Some legal experts believe cryptocurrencies should be treated as securities. Others claim they should be defined as commodities – like oil and gold. And some claim that cryptocurrencies should be legally treated the same way as fiat currencies.
This mess of definitions has made it difficult for blockchain companies to operate across the United States: a single legislative change could plunge a business into uncertainty. That’s why the introduction of this latest bill in Wyoming is a big deal.
No longer will locally-based blockchain companies be forced to guess or predict future legislation. They can operate under the assumption that a digital asset is classified into one of the three categories listed above.
Banks in Wyoming Can Be Legal Custodians of Digital Assets
The Wyoming bill also has another important caveat: the bill allows the state of Wyoming to authorize banks to opt into an enhanced supervision regime for digital asset custody. This regime meets the SEC’s requirements for “qualified custodians” of digital assets.
This also means that banks in Wyoming can act as custodians of digital assets. An ordinary Wyoming bank, for example, can be authorized to securely hold digital assets. However, as clarified by Forbes:
“The custody advancement for cryptocurrencies in Wyoming is also notable as it is done through a bank, but the bank itself would not be taking deposits of digital assets – these would be “assets under administration” rather than bank deposits.”
This is an important distinction for how custody banks operate in other states. With a bank storing digital assets instead of a trust company, the bank can operate in all 50 states.
As reported by Forbes, it’s also known that the SEC prefers a bank over a trust company to be a qualified custodian for digital assets.
Cryptocurrencies and Digital Assets in Wyoming Have the Same Legal Status as Money
Thanks to this new bill, cryptocurrencies and digital assets in Wyoming have the same legal status as money.
The bill classifies digital assets as money. That’s an important difference from a legal standpoint: money has “super negotiability” rules under the Uniform Commercial Code Article 9. Now that cryptocurrencies have been declared money in Wyoming, cryptocurrencies fall under this same code. Here’s what that means, according to Forbes:
“This classification is very beneficial for coin lending businesses as UCC 9-332(a) reads: “A transferee of money takes the money free of a security interest unless the transferee acts in collusion with the debtor in violating the rights of the secured party.” Meaning that as long as the transferee isn’t colluding to avoid the lien, Bitcoin transfers are free and clear of it.”
It also means that bitcoin has legal status without the involvement of an intermediary. The law recognizes the peer-to-peer nature of cryptocurrencies like bitcoin, where money can be transferred without the involvement of an intermediary.
Because there’s no intermediary, there is also no debtor/creditor relationship. Owners of virtual currencies will therefore have their property rights recognized.
Wyoming Now Classifies Digital Assets Into Three Different Categories
The Wyoming bill introduces three classifications for digital assets, including:
- Digital Securities: These have the same treatment as uncertificated securities under the UCC.
- Digital Consumer Tokens: This have the same treatment as “general intangibles” based on the Uniform Commercial Code.
- Virtual Currencies: These are digital assets that have the same status as money.
Blockchain Businesses May Flock to Wyoming
While the U.S. federal government and individual states grapple with blockchain legislation, Wyoming appears to have introduced clear, easy-to-understand legislation regarding cryptocurrencies.
The move is expected to draw blockchain businesses to the state of Wyoming. As the least-populated state in America, Wyoming is constantly searching for ways to compete with its larger, more-populated neighbors. The clarified blockchain legislation could be a huge boon for the state:
“Wyoming spotted an opportunity to lead in this field last year, and realised it had just as many advantages in competing for this nascent industry as any other place – and more so,” native Wyoming resident Caitlin Long explained.
“Blockchain is software, so it’s global. A line of code doesn’t care who wrote it or where it was written. As Joe Lubin said when he spoke at WyoHackathon last fall, there’s no reason why the next Google can’t be here in Wyoming.”
Cryptocurrencies and other digital assets now have the same legal status as money under commercial law. Blockchain and crypto businesses seeking clearer legal status may now find it under Wyoming’s new legislation.
That’s a huge leap forward – and it could mean that a growing number of blockchain and cryptocurrency companies are going to flock to Wyoming.