What Do Wyoming’s 13 New Blockchain Laws Mean?
Wyoming has enacted a total of 13 blockchain-enabling laws, making it the only US state to provide a comprehensive, welcoming legal framework that enables blockchain technology to flourish, both for individuals and companies. These laws enable innovation and creativity, and are meant to bring capital, jobs and revenue into Wyoming. With the fluctuating job market shifting more towards technology, robotics, AI and VR, forward thinking states like Wyoming can help to be on the front end of that emerging job market.
Law and technology are discrete systems. For a new technology to attain wide adoption, the law and technology must be “backwards-compatible,” as early bitcoin investor Trace Mayer puts it. In a nutshell, that’s what Wyoming has now done for blockchain technology.
Here are the top highlights regarding Wyoming’s newest blockchain laws:
- Recognizes direct property rights for individual owners of digital assets of all types (virtual currencies, digital securities and utility tokens) and applies the super-negotiability rules of commercial law to virtual currencies—which foster their liquidity—by applying the very same rules that apply to money. Wyoming’s commercial law reflects the true nature of digital assets (directly owned, peer-to-peer assets), and I strongly encourage other states to adopt Wyoming’s same commercial law protections;
- Creates a fintech sandbox to provide regulatory relief to financial innovators from existing laws for up to 3 years. It’s broadly reciprocal with fintech sandboxes both in the US and globally;
- Authorizes a new type of state-chartered depository institution to provide basic banking services to blockchain and other businesses. The bank is required to have 100% reserves, cannot lend, is for business depositors only, and FDIC insurance is optional. Such banks could be operating as soon as March 31, 2020;
- Authorizes the first true “qualified custodian” for digital assets which is a bank. Wyoming banks can start such operations as soon as September 1, 2019. Wyoming’s digital asset custodians will stand out above all others because they will respect the DIRECT ownership nature of digital assets! These new custodians won’t be like traditional securities custodians, because for a Wyoming-based custodian investors will still DIRECTLY own their digital assets under custody as a BAILMENT, which means they retain direct ownership while merely giving up control (much like valet parking). Today, institutional investors are forced to be de facto creditors of their securities custodians, since all publicly-traded securities are owned indirectly. Custody under bailment is possible in securities custody today, but it’s neutered by the fact that all securities are owned indirectly—investors can’t directly own the real security, and therefore they’re really just counterparties to the custodian. So, what Wyoming has done is truly revolutionary—BAILMENT + DIRECT ownership! It doesn’t exist in securities custody today! Customers of Wyoming custodians can still choose indirect ownership, but it’s on much more investor-friendly terms than exist in securities custody today. In sum, Wyoming will become known as the home of SOLVENT, investor-friendly digital asset custodians to which investment fiduciaries are likely to migrate over time.
With this, we see real true legal support and regulation for blockchain technology. With these, it is more than likely we will see other states follow and with some of the other state tax laws as it concerns Bitcoin out there, we see a rising tide of legal support and framework. This will hasten adoption, business support and investment, along with federal authorities looking to create federal legislation to support this technology.