The Buzz 2: The Bitcoin Bill

By on March 2, 2018

Wyoming reps push to make the state a cryptocurrency capital

Jackson Hole, WY – There’s a saying in financial markets that cryptocurrencies, like Bitcoin, are the financial equivalent of the Wild West—an untamed market with few rules and little to no regulation. But crypto technology holds promise as a tool to change the way business is conducted. That may be why the Wyoming Legislature seems so interested in these nascent and sometimes mysterious technologies and forms of currency.

Last week the Wyoming House passed two bills dealing with cryptocurrencies and blockchain—a secure method of tracking transactions, documents and records—making the state one of the first in the nation to do so. The house voted unanimously in favor of House Bill 70, the “Utility token bill,” and House Bill 19, “the bitcoin bill.”

Passage of these two bills could position the state as a leader in the cryptocurrency and blockchain industry, with the potential of drawing entrepreneurs to the state.

Wyoming has already seen a number of cryptocurrency “miners” move in. Cryptocurrency miners, who use arrays of parallel processing computers to perform complex calculations to “mine” a bitcoin, have been attracted to the state due for its cheap electricity and low costs to cool their equipment thanks to Wyoming’s frigid weather.

A lack of personal income tax and a small government mentality have also helped draw in some cryptocurrency entrepreneurs to the Cowboy State.    

HB 70 would allow some types of cryptocurrency called “utility tokens” to be created outside the rules governing traditional securities, such as stocks or bonds.

Utility tokens are a type of virtual currency that can be used in conjunction with a blockchain record that acts as a promise to future access to a product or service. Such tokens are generated in hopes that a product or service will be more valuable at another time. According to a cryptocurrency research and advising firm, Strategic Coin, utility tokens work like tickets to sporting events; a ticket for a game between two teams may go up in price if the two teams are both on a hot streak. The price for the ticket may go down if both teams are on a losing streak.

The Wyoming bill would exempt such utility tokens from being regulated like a traditional security as long as the tokens met certain criteria, key among them that the tokens not be sold as an investment, but rather as access to a defined good or service. Additionally, the creator of the token cannot repurchase the token after a potential price change, nor can it find a buyer for the token.

The second bill passed by the Wyoming House, HB 19, exempts cryptocurrency from the Wyoming Money Transmitter Act, a law that deals with licensure for professionals and businesses dealing with electronic money transfers or transmittals.

Previously, an interpretation of the law made it impractical for cryptocurrency exchanges from operating within the state. HB 19 would exempt cryptocurrency exchanges from the Money Transmitter Act, freeing the exchanges up to operate within the state.

Other bills in the state that have not yet been acted upon would address how businesses would be allowed to use blockchain technology, would exempt “crypto property” like bitcoin or other cryptocurrencies from property taxes and another bill would allow for the creation of serial Limited Liability Corporations, a type of incorporation useful to decentralized protocols like blockchain.

According to the Wyoming Blockchain Coalition, an advocacy group credited with advancing the cryptocurrency and blockchain bills through the legislature, blockchain and cryptocurrencies could be a lucrative industry for Wyoming, a state that is desperate to diversify its economy and become less reliant on highly cyclical industries, like minerals and mining.

According to the group, in 2016 there were more than $2 billion in utility tokens—the type of cryptocurrency addressed by HB 70—created. The value of the blockchain ecosystem was estimated to be $243 billion in 2017, and there were 26,000 blockchain projects launched in 2016. Also according to the group, banks, healthcare companies, logistics firms and government agencies have begun embracing blockchain projects.

Wyoming, the group says, is well poised to capitalize on the projected boom in blockchain. The state’s favorable corporate laws, strong privacy protections, low taxes, support from the University of Wyoming and a tremendous amount of internet bandwidth in Cheyenne mean the state could be a big contender in the future of the budding technology.

Others, however, have pointed out that many of the very things that might make Wyoming appealing to cryptocurrency miners and entrepreneurs may only cause problems for the state. Many have criticized cryptocurrencies as pyramid schemes or an example of a classic bubble. Cryptocurrencies are also not considered a mainstream currency; the vast majority of businesses do not accept the virtual money as payment for most goods or services. Some national governments are also cautious of the currencies, meaning a future Wild West regulation-free environment may be temporary.

For now the bills will move to the State Senate for debate.

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