IF YOU BELIEVE you may have stumbled into a cryptocurrency conference (godspeed, my friend), there are a few telltale signs. First, look for the live bulls and the yellow Lambos. But if they’ve fallen victim to cost-cutting or newfound modesty, then look for a procession of cream-colored cowboy hats. They belong to a retinue of lobbyists and legislators from Wyoming, preaching the virtues of their state as a mecca for blockchain.
GREGORY BARBER COVERS CRYPTOCURRENCY, BLOCKCHAIN, AND ARTIFICIAL INTELLIGENCE FOR WIRED.
Wyoming’s transformation into a blockchain booster is somewhat legendary in cryptocurrency circles. Until recently, strict money-transmitter laws meant residents there couldn’t even use a Coinbase account. But over the past two years, Wyoming has enacted 13 blockchain laws, with a raft of other proposals on the way. The question is, what does the country’s least-populous state, far from tech hubs and long associated with an unhealthy dependency on resource extraction, want with blockchain?
“The ethos of blockchain and the ethos of Wyoming are very similar,” says Caitlin Long, cofounder of the Wyoming Blockchain Coalition, a lobbying group responsible for pushing for the crypto-friendly bills, many with a libertarian bent.
Wyoming’s push is a reflection of the nation’s patchwork of state laws, created in the absence of clear federal rules. Some, like New York, favor rigorous regulation. The state’s Bitlicense regime, which began in 2015, involves a strict vetting process for companies that want to deal with New York residents, prompting complaints that it deters innovation. Legislators in Wyoming, as well as neighboring Colorado and Montana, see that as an opening.
“It’s been good for Wyoming that the federal government has been proving its stripes of incompetency,” says Tyler Lindholm, a state representative who, at 6’7″, does much to increase the visibility of the cowboy hats.
Their fortunes improved by casting cryptocurrency as a way to replace flagging state revenue from the coal industry, Long says. Working with lawyers from Consensys, a company that builds and promotes Ethereum applications, they drafted bills that exempted certain digital tokens from state securities rules, and exempted cryptocurrency from state property taxes. Those laws passed, and over the next year they became the basis of what Long calls a complete legal framework for owners of digital assets and the companies dealing with them.
The effect of those laws, however, appears to be somewhat muted, says Benjamin Sauter, a lawyer for Kobre & Kim who works extensively with blockchain companies. The trouble is that blockchain, by nature, is not easily contained to one jurisdiction. It’s easy enough to fence out residents of New York, but harder for a company to take advantage of more permissive laws in one small state. And on issues like securities laws, companies still need to play by federal rules. Without hammering out any formal guidelines, the Securities and Exchange Commission last year suggested all tokens involved in initial coin offerings were securities, and thus subject to federal oversight. The move largely scuttled Wyoming’s plans to attract companies doing ICOs to the state, Long says.
Still, the new laws have brought one thing to Wyoming: limited liability corporations, or LLCs, dozens of them with “Blockchain” or “Crypto” in their names. “I’ve been around startups a long time and I don’t ever remember interacting with a tech startup that was based in Wyoming,” says Stephen McKeon, an economics professor at the University of Oregon. “But in the last two years just in crypto I’ve seen it multiple times.” But he notes that those companies, while legally based in Wyoming, have rarely established a physical presence there.
Lindholm, who last year cofounded his own blockchain startup, BeefChain, which verifies the provenance of premium Wyoming cattle, argues the state is on a path to attract companies that offer more than a $100 filing fee and a PO box in Cheyenne. Companies, in other words, that bring jobs and hubs of innovation that benefit Wyomingites. He points to a pair of bills passed in February as an initial step, establishing a new type of crypto-friendly banking license, as well as rules that allow banks to hold digital assets. Banks chartered under the license would not be FDIC-backed and unable to lend, with a requirement to hold more than 100 percent of their liabilities in reserve. And they would have to set up a physical office in the state.