The least populated state in the country, Wyoming is undeniably a pioneer state, where rugged independence and resilience are valued, and cattle outnumber people by more than two to one. The state nickname is the Equality State (a proud nod to Wyoming being the first US state to permit women to vote) and its core business base is energy and agriculture, sectors which have had some very hard years. Wyoming has also been quietly changing the landscape for blockchain entrepreneurs, businesses, and, if all goes to plan, the lives of its citizens, tells Paige Pierce.

A few years back, Caitlin Long, a Wall Street veteran with impressive bona fides who also happens to be an alumnus of the University of Wyoming (as well as Harvard Law), wanted to endow a scholarship for women in STEM (science, technology, engineering and mathematics) using cryptocurrency. With Wyoming’s then outdated money transmitter laws, she was informed she could not make her donation in cryptocurrency.  Never one to be deterred, she volunteered to help fix the regulations.

And so began a journey into the spotlight that no one could have predicted. It was one that introduced her to Tyler Lindholm and united them in their work to transform the entrepreneurial blockchain and cryptocurrency landscape of Wyoming.

Tyler Lindholm is a lifelong cattle rancher, naval veteran, husband, father of four, and former state representative (six years, ending January 2021). A longtime cryptocurrency enthusiast, he has been referred to as Wyoming’s blockchain cowboy.

Long and Lindholm began partnering on blockchain legislation in 2017 by framing cryptocurrency to legislators as a way to replace declining state revenue from the energy industry. Working with a legal team from Consensys, a company that builds and promotes ethereum applications, they ultimately crafted a suite of legislation that now provides a legal framework for owners of digital assets and the companies dealing with them, as well as blockchain-related entrepreneurial endeavors within Wyoming. As the sponsor or co-sponsor for these bills, Lindholm was indisputably one of the leading drivers in the Wyoming legislature effecting change for the state and its residents.

Defined the utility token

Wyoming’s initial wave of five laws were passed in 2018, and probably the most significant of these was the one that exempts cryptocurrency from property taxes. The IRS classifies Bitcoin and other cryptocurrencies as property and taxes them as such, however, Wyoming passed a state law that exempts virtual currencies (along with other intangible items) from property tax.

The second most significant law was the utility token bill. Wyoming broke ground in 2018 with legislation that offered a clear, unambiguous definition of utility token. Subsequent to passing though, this bill has encountered some issues at the federal level because everyone is afraid of running afoul of the SEC; concern about the SEC has blocked the degree of success Wyoming was hoping for, in the short term at least.

In 2019, eight more laws were passed and the headline bill was one that established a new type of digital asset-friendly banking license, as well as rules that permit banks to hold digital assets. Banks chartered under the license would not be backed by the Federal Deposit Insurance Corporation (FDIC) and would be unable to lend, being required to hold 100% of their liabilities in reserve. Additionally, these Special Purpose Depository Institutions (SPDIs) would have to set up a physical presence in the state.

SPDI accepting crypto companies

But why are these SPDI (‘speedy’) banks even needed? In 2013, the Department of Justice launched Operation Choke Point, which investigated and put pressure on banks in the US in relation to the business they did with select companies believed to be at higher risk for fraud and money laundering.

A central element of Choke Point was the FDIC’s ‘higher risk’ merchant category buckets and, perhaps due to a lack of understanding, blockchain-related companies were rolled up within the 31 categories despite their technological innovations and value to the US economy.

Operation Choke Point asked banks to identify customers who were arguably only guilty of doing something government officials didn’t like – or, in the case of blockchain and cryptocurrency, didn’t understand –- to ‘choke off’ those customers’ access to financial services, thereby shutting down their accounts and, of course, their businesses.

While Operation Choke Point was formally ended in 2017, due to a Congressional backlash, federal bank auditors continue to scrutinize blockchain banking clients to such a degree that traditional banks, under pressure from the FDIC, often refuse to provide banking services or accounts or suddenly cut off banking services with little to no warning. There are more real-life stories of this happening than you would believe and, large or small, you cannot run a business without a checking account to pay employees, vendors, taxes, etc.

The creation of the SPDI ‘bank’ in Wyoming answered the call of all blockchain-related entrepreneurs and companies everywhere by providing statutory safety for this still nascent but rocket-fueled sector of individuals and businesses. To date, I believe four SPDI charters have been awarded: Kraken, Avanti Bank (Caitlin Long), and, just last summer, Commercium Bank and Wyoming Deposit & Transfer Company.

Wyoming – The blockchain capital

Wyoming is in a race with Delaware to become the blockchain capital of the country, and the two are setting a precedent for other states, like Colorado, Missouri, Utah, and Texas, to follow while vying for market share in the blockchain and cryptocurrency ever-expanding market cap.

With a legal framework in place, including the creation of a financial technology sandbox, both the state and the blockchain industry are at an inflection point. One day, and sooner than you think, land titles, art, securities, healthcare records, food origins, precious gems, supply chains, currency, banking, voting, and so much more will all be on a blockchain and Wyoming, for a host of reasons, two of them being Caitlin Long and Tyler Lindholm, will be front and center because of the statutory landscape it has worked so hard to put in place.

Under the leadership of Governor Mark Gordon, 24 pieces (at the last count) of forward-thinking legislation co-created by the team identified in this article and with the assistance of so many others have been introduced and passed. Armed with a shared vision, and new tools for realizing that vision, Wyoming is embracing a new, exciting path forward. So the next time you’re thinking of flying over on your way to a coast, you might want to change those plans and come see one of our nation’s gems. Come to Wyoming, the blockchain and cowboy State.