Wyoming is best known for its successful fossil fuel industries such as coal, oil, and gas. But the cowboy state has been looking to diversify its portfolio by welcoming businesses dealing in digital assets. In 2019, Wyoming state lawmakers created a special charter designed to attract cryptocurrency platforms.
The charter allows banks to facilitate cryptocurrency trading by its customers. For customers, this means seamlessly converting your Bitcoin to cash, without the traditional middleman. This will result in lower transaction costs for users, one of the largest costs associated with cryptocurrency trading. For banks, this means having the ability to hold bitcoin “keys” for bitcoin owners. Moreover, Wyoming laws enacted in 2018 and 2019 cemented the treatment of digital assets in commercial law, setting businesses up to create “smart contracts” under safe conditions. This law also allows cryptocurrency institutions to establish as “special-purpose depository institutions,” allowing them to handle, process, and store dollars and digital currencies throughout the United States.
Lawmakers also made it easier for out-of-state investors to create Wyoming limited liability corporations to invest cryptocurrencies thorough. This allows investors to take advantage of favorable Wyoming laws, without being present in the state.
Wyoming law in this field has been developing at a rapid pace compared to similarly situated states and federal lawmakers. Wyoming legislators have faced backlash from federal agencies, that have been forced to reconsider their own crypto-related laws because of Wyoming’s new legislative regime. The backlash largely stems from a 1978 Supreme Court case, Marquette National Bank v. First of Omaha, where the Court held that banks only need to follow interest rate caps of the state they are chartered within. Put simply, this means that Wyoming’s low interest rate cap effects the other 49 states.
Wyoming’s push to become the cryptocurrency capital of the United States seems to have paid off in some regards. Two major cryptocurrency companies have partially began operating out of the state: Ripple, with a valuation of over $10 billion, and Kraken, with a valuation of $4 billion. Whether these benefits will trickle down to Wyoming state citizens is another story. Because these crypto companies are largely untaxed, the strategy may take years to payoff.
Wyoming’s strategy has been to undercut competing states by offering tax cuts and unrestrictive regulation. This is not a new strategy, South Dakota utilized the same strategy in the 1980’s to incentivize credit card companies to move to the state. Delaware has long welcomed corporations to the state by cutting corporate tax rates.
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