Wyoming state legislators in the U.S. passed, on November 30th, 2018, a bill that allows for the integration of blockchain technology with traditional banking practices and processes. The passed bill will create a new category of banking termed Special Purpose Depository Banks in the U.S. state, under which banks will legally offer blockchain-based assets services while being under the applicable federal and state laws of any other bank. It is meant to make it easy for blockchain and crypto innovators to access banking services and run accounts, such that the innovations are encouraged or boosted in the state.
This category of banks is required to offer crypto banking services but should maintain equal liquidity (a form of cash or bank authorized investments) with the value of cryptocurrencies they store, which is different from traditional banks that only require keeping a fraction of reserves to prevent money laundering and fraud. They cannot, however,l offer loans, have no security from the U.S. Federal Deposit Insurance Corporation and are to operate under Wyoming’s Division of Banking. The bank would be owned, operated and insured by approved “members” decided on by a board of industry professionals.
The legislators who met under the ‘Blockchain Task Force’ also discussed two other bills namely the Banking Technology and Stock Revisions and the Financial Technology Sandbox.
The news of the passage of the bill was received warmly by representatives of the Wyoming Blockchain Coalition starting with co-founder and blockchain advocate Caitlin Long, who thanked supporters following the passage of the bill. The coalition, whose main role is to advocate blockchain and crypto investment in the state, has been championing for the adoption of blockchain and crypto-friendly bills as a way that would help the state economy.
The bill is also expected to reduce other banking difficulties experienced by blockchain and cryptocurrency innovators such as the refusal of traditional banks to open accounts with and accept deposits from them including deposits in the United States currency obtained from the sale of virtual currency or other digital assets. This is due to the strict banking regulations they operate in.
The committee recognized the challenges experienced by "many blockchain innovators" such as the inability to access secure and reliable banking services, which hampers the development of blockchain services and products in the marketplace. This is in addition to compliant challenges faced by the innovators with issues such as federal customer identification, money laundering, among others, at a time when federally insured financial institutions are not permitted to manage accounts in virtual currency or hold other digital assets. The challenges are made worse by the fact that regulators and banks are not familiar with blockchain innovator businesses.
The bill is also meant to "emphasize Wyoming’s partnership with the technology and financial industry and safely grow" the developing financial sector in the state. The state has now enacted 5 blockchain-friendly bills so far in 2018 with 6 more "committee bills" having an elevated chance of becoming law. This is in addition to advancing the state's agenda for "economic diversification," an agenda it has concentrated on over the past two years.
Committee representative Tyler Lindholm said that the state has been looking at different technologies in an effort to achieve economic diversification and to expand. This would bring in tech jobs and "new and young businesses" according to Lindholm.
The passage of the bill, which once again, demonstrates Wyoming support for blockchain technology, was voted 13-1 amidst resistance from banking institutions. The state passed yet another bill in March 2018 to qualify crypto tokens as a new asset class and to exempt them from Wyoming Money Transmitter Act, which requires businesses to be licensed.