With regulations being one of the main reasons why traditional commercial banks give bitcoin a wide berth, state senators and representatives in Wyoming are eyeing a legislative fix to the problem.
Legislators in the “Equality State” are currently considering drafting legislation that would allow the creation of a cryptocurrency bank to serve the needs of the digital asset and blockchain firms in the state. During a recent blockchain task force meeting, stakeholders discussed draft legislation that would see “special-purpose depository institutions” receive regulatory safe harbor. The blockchain task force is made up of state senators and representatives, as well as technical appointees including blockchain advocate and Wall Street veteran Caitlin Long.
Such a crypto bank would make it easy for cryptocurrency and blockchain firms to operate in the state, as they are currently shunned by traditional financial institutions.
“If a bank somehow realizes they’re dealing with crypto or blockchain currency in any way, a person’s accounts can be shut down immediately. The way I see it, that’s banks being discriminatory toward certain businesses,” Wyoming state legislator and the co-chairperson of the blockchain committee, Tyler Lindholm, told Star Tribune in an interview.
In essence, the task of the crypto-supporting bank would be facilitating the transactions and storage of both digital assets and traditional currency for cryptocurrency firms, allowing them to engage in a world where fiat currencies still rule and banks are hesitant to service bitcoin businesses.
The cryptocurrency depository institution would, however, not be a bank in the traditional sense of the word since it would not have the mandate to give out loans. And while traditional banks operate on a fractional-reserve basis, Wyoming’s crypto bank will be required to ensure that it maintains a cryptocurrency-to-liquid-funds ratio of 100%, essentially making it a “money warehouse” or a “transfer institution.”
Additionally, any unexpected losses made by the crypto bank would not be covered by the U.S. Federal Deposit Insurance Corporation. Per the draft legislation, the crypto bank would fall under the regulatory authority of Wyoming’s Division of Banking.
Only established businesses will be allowed to become members of the bank with $5,000 being the minimum that will be allowed for storage with the bank. The blockchain bank will not be state-owned but will be in the hands of members who will be voted on by a board composed of industry professionals.
The state of Wyoming has generally had a progressive stance with regards to blockchain technology and cryptocurrencies. As CCN.com reported in March, the Equality State passed the HB-70 Utility ICO bill which not only offered a definition for utility tokens but also exempted them from securities laws. Wyoming’s state legislature also earlier this year enacted a law which exempts cryptocurrency miners and blockchain startups from paying property tax.
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Last modified: June 11, 2020 1:49 PM UTC