Wyoming is best known for mountain ranges, cowboys and open roads, but 40 years ago it was the first state ever to recognize limited liability companies (LLCs). Today, Wyoming is building on this foundation to become one of the most progressive and friendly homes for crypto and blockchain companies in the world.
The bi-partisan Wyoming Blockchain Task Force, which is chartered by the state legislature, is responsible for drafting proposed legislation for the state. In the 2018/2019 legislative sessions, the state passed 13 crypto-friendly laws designed to make Wyoming the destination for crypto companies and entrepreneurs. This past week (September 19-22), the state hosted its second annual WyoHackathon at the University of Wyoming. Kraken was the headline sponsor for this year’s event, and couldn’t be more proud to be able to support this and all of the great initiatives coming out of The Equality State.
There is no individual more closely aligned to Wyoming’s blockchain initiatives than crypto and blockchain veteran, and co-founder of the Wyoming Blockchain Coalition, Caitlin Long. We spoke with Caitlin about how far the state has come in the crypto space and what she was excited to see at this year’s WyoHackathon. (Responses have been edited for clarity and length).
After spending 22 Years on Wall Street, how did you get involved with crypto and blockchain in Wyoming?
It all started when I tried to donate bitcoin to my alma mater, the University of Wyoming. However, I ran directly into Wyoming’s bad money transmitter law (MTL). Wyoming was one of 3 states with bad language in its MTL that prompted leading companies to leave the space. The school could not find anyone to exchange bitcoin for fiat so they had to decline the donation.
I said to them, “let’s get this fixed because I’m not the only one who is going to run into this [problem].” That’s what got everything started.
What are the main thrusts of Wyoming’s legislative efforts?
First, Wyoming is taking a hands-off approach to the cryptocurrency industry and decided its existing fraud and theft laws would be sufficient to prosecute criminals.
Second, Wyoming clarified that there will not be taxes on cryptoassets within the state.
Third, and this is really important even though it is going to sound boring, we clarified the legal status of cryptoassets within Wyoming. This is critical because it provides roadmaps for items such as dispute resolution or how to create a lien against a cryptoasset.
We also created a digital asset custody regime that is consistent with “Not Your Keys, Not Your Coins”. Similar to dropping off your car keys with a valet, you are not giving up ownership and expect to receive the exact same car when you return. Valets cannot take your car for a joy-ride or give you a substitute car. They owe you your actual car back. For digital asset purposes, this law means a custodian can only use your assets in manners in which they are directed to by you.
How many companies have formed legal entities in the state? Who is registering/domiciling in the State?
There are up to several hundred if not thousands of crypto companies that have legally (not physically) domiciled in the state. Just like in Delaware, companies can register and gain some of the legal protections without actually locating there.
However, we have also created a new type of regulated financial institution, known as a Special Purpose Depository Institution, that will serve as a bridge between crypto companies and the traditional financial system, which will lead to more companies domiciling physically in the state. These institutions will have management, legal and compliance, and IT teams physically located in the state starting next year. A vast majority of crypto companies have had issues obtaining or retaining bank accounts, and Wyoming is trying to solve that for the crypto industry.
What are the biggest drivers/challenges to mainstream adoption of crypto? Do you think it will be led by institutional or retail Investors?
I think it is retail investors looking for a reliable store of value amid the cracks in the traditional financial system. I’ve spoken in the past about significant issues that I encountered on Wall Street that just punched me in the gut, as they were unfair to mom and pop investors. There is a lot of that on Wall Street, and there are also a lot of well-meaning people that just don’t understand how the system works, which also disadvantages retail investors.
Crypto solves a lot of these problems, so as more people learn that the incumbent financial system is unstable and unfair to them, they will look to diversify their assets.
Bitcoin tends to do well in times of geopolitical instability as well. As Nicholas Nasim Talib points out you can cross borders with bitcoin by memorizing your recovery seed, and no totalitarian government would ever know you did it.
What are the use cases for crypto that you find most interesting?
Clearly store of value is a big use case. Payments is another one. I see a double-edged sword when it comes to Facebook and Libra, but I think there is a lot of positive that can come to the crypto industry if Facebook successfully launches Libra.
The third, and most significant, is getting capital markets switched over to crypto. This will solve a lot of unfairness on Wall Street. For example, in the U.S. there are three people who think they own a US Treasury bond for every one who actually does. Auditing rules do not pick this up. This sort of thing is a direct violation of property rights, and it is one of the reasons I love Wyoming because this would never happen here. Wyoming gives very clearly-defined property rights for crypto assets, and we will never have a “musical chairs” type of scenario that exists in the financial industry in widespread quantities.
What were the highlights’ for you of this year’s WyoHackathon?
Kraken was a big booster of WyoHackathon, and for that I’m especially grateful. Jesse is a perennial favorite with both developers and non-devs, and he didn’t disappoint. You brought a whole team and helped us across the board. I’m especially tickled that UW Computer Science students won Kraken’s challenges! We hope to see you back here next year!
WyoHackathon took place at the University of Wyoming from September 19-22nd. Details about the event are available here.