Tenth Amendment Center: Wyoming Laws to Encourage Cryptocurrency Already Having Positive Impact
CHEYENNE, Wyo. (Aug. 13, 2018) – Efforts to encourage the use of cryptocurrency in Wyoming have already paid off. Earlier this month, crypto exchange Coinbase announced it will return to the state after a three-year absence thanks to a bill passed during the most recent legislative session. Efforts like this could ultimately undermine the Federal Reserve’s monopoly on money.
A coalition of five Republican representatives and a senator sponsored House Bill 19 (HB19). The new law exempts virtual currency from the Wyoming Money Transmitter Act.
Coinbase abruptly pulled up stakes and left the state in 2015 after regulators informed the company the Money Transmitter Act required it to keep double reserves for all Wyoming customers’ assets. Under the law, Coinbase had to keep fiat currency reserves equal to the value of crypto-assets held by the company for Wyoming customers. For example, if a customer had $1,000 in crypto, Coinbase was required to hold an additional $1,000 in cash.
“Although Coinbase securely maintains 100% of all customer funds, it is impractical, costly, and inefficient for us to establish a redundant reserve of fiat currency in equivalent value,” the company said when it shut down operations in the state.
With the passage of HB19 and crypto now exempt from the Money Transmitter Act, Coinbase announced it will once again serve Wyoming customers.
“Coinbase welcomed the opportunity to work with Wyoming House of Representatives Majority Floor Leader David Miller, State Senator Eli Bebout, members of the Blockchain Task Force, and their colleagues to find a solution that allows cryptocurrency custodians and exchanges to reestablish operations,” the company said in a statement.
Wyoming Wants to Be the Cryptocurrency Capital
HB19 was one of several bills passed by the Wyoming legislature during the session meant to remove barriers to the use of cryptocurrencies and to position the state to become the national leader in cryptocurrency and blockchain business.
Passage of Senate Bill 111 exempts “virtual currencies” from state property taxes. The bill defines “virtual currencies” as “any type of digital representation of value that is used as a medium of exchange, unit of account or store of value and is not recognized as legal tender by the United States government.”
House Bill 70 (HB70) creates a clear definition of a “utility token.” According to CCN, the new law “offers a clear, unambiguous definition. It states that in order for a token to be classified as a utility token, or “open blockchain token”, it must meet the following conditions:”
- The token has not been marketed by the protocol developers as an investment opportunity.
- The token is exchangeable for goods or services. (This basically excludes pre-sales, as it seems to mandates protocols must work before tokens are issued)
- The protocol developer has not entered into a repurchase agreement of any kind or entered into an agreement to locate buyers for the token.
Passage of the “blockchain records bill” (HB101) allows companies to store internal documents and databases on the blockchain.
A final bill, HB126, set up a legal framework designed to encourage crypto companies to register in Wyoming as opposed to Deleware.
Passage of all of these laws was part of a broader strategy seeking to make Wyoming the blockchain/cryptocurrency capital. They also take an important first step toward generating currency competition. If other forms of money, whether it be cryptocurrencies or gold and silver, gain a foothold in the marketplace against Federal Reserve notes, people will be able to choose them over the central bank’s rapidly-depreciating paper currency. The freedom of choice expanded by these laws helps allow Wyoming residents to secure the purchasing power of their money.
In a paper published at the Mises Institute, Constitutional tender expert Professor William Greene said when people in multiple states start using gold and silver instead of Federal Reserve Notes, it would effectively nullify the Federal Reserve and end the federal government’s monopoly on money.
“Over time, as residents of the state use both Federal Reserve notes and silver and gold coins, the fact that the coins hold their value more than Federal Reserve notes do will lead to a “reverse Gresham’s Law” effect, where good money (gold and silver coins) will drive out bad money (Federal Reserve notes). As this happens, a cascade of events can begin to occur, including the flow of real wealth toward the state’s treasury, an influx of banking business from outside of the state – as people in other states carry out their desire to bank with sound money – and an eventual outcry against the use of Federal Reserve notes for any transactions.”
Once things get to that point, Federal Reserve notes would become largely unwanted and irrelevant for ordinary people.
Cryptocurrencies open up another pathway to this same goal.