Wyoming was the first state in the United States to accept cryptocurrencies. It has quickly emerged as one of the most crypto-friendly areas in the United States.
- Wyoming has passed a number of laws that have laid the groundwork for the cryptocurrency industry to thrive.
- For cryptocurrency holders and businesses, the state provides tax breaks and a welcoming regulatory environment.
- It also pioneered a banking charter for the sector and legally recognizes DAOs.
Wyoming is quickly becoming a beacon for crypto adoption in the United States, having established the mature legal framework required for the digital assets industry to thrive.
Wyoming Takes the Lead in Crypto Regulation
Wyoming is quickly emerging as the nation’s leading crypto hub. Pro-crypto regulations and zero corporate and personal state income taxes have piqued the interest of some of the industry’s biggest players, including Ripple and Kraken, in recent years.
In the last few years, Wyoming has become the most crypto-friendly state in the United States, thanks to the passage of approximately 24 crypto-related laws. Following Wyoming’s lead, other states such as Texas, Nevada, North Dakota, Illinois, and Montana have introduced crypto-friendly legislation.
House Bill 19 (HB 19) exempted cryptocurrencies from the state’s money transmission licensing requirements in 2018. Additionally, anyone who creates, sells, or facilitates the exchange of a blockchain token is exempt from money transmission laws.
Other states, such as New York, require blockchain-based cryptocurrency operators to obtain a BitLicense, or money transmission license. Some applicants struggle to obtain the license. Meanwhile, Wyoming’s Financial Technology Sandbox allows blockchain startups to test new products and technologies without fear of regulatory repercussions.
Wyoming has also exempted cryptocurrency-related taxes from state taxation. While the state recognizes cryptocurrencies as property, the 2018 “Crypto Property Tax Exemption Bill” (SF111) exempted the asset class from property taxes.
This means that cryptocurrency transactions conducted by Wyoming-based businesses and individuals are not taxed at the state level. Crypto activities in the state, on the other hand, are subject to separate federal taxes. Another critical piece of legislation, the Wyoming Utility Token Act (HB 62), was passed in 2019. This law stated that tokens issued on a blockchain with “specified consumptive characteristics” would be exempt from securities laws and treated only as intangible personal property.
Wyoming Welcomes Cryptocurrency Banks
To date, US regulators have been hesitant to allow banking services for the cryptocurrency sector. As a result, many crypto startups have had difficulty obtaining basic bank account services for their operations across the country.
Wyoming, on the other hand, has introduced a new banking charter for the industry in order to change the way crypto banking is conducted. In 2019, the state passed HB0074, which established crypto banks known as special-purpose depository institutions (SDPIs).
So far, the Wyoming Division of Banking has granted four banking charters, with several more expected in the near future.
Kraken, the leading cryptocurrency exchange, was the first to become an SDPI in 2018, followed by Avanti Finance, Wyoming Deposit and Transfer, and Commercium Financial. These state-chartered entities are authorized to provide critical financial services to crypto-based businesses, such as deposit-taking, custody, and fiduciary services for cryptocurrencies.
SDPIs are only available to business depositors, must maintain 100 percent reserves at all times, and cannot lend. FDIC insurance is not required, unlike in most traditional banks.
Wyoming has a history of being a forerunner in the development of novel corporate entities. In 1977, it was the first jurisdiction in the world to introduce the concept of a Limited Liability Corporation (LLC), which later became one of the world’s most popular corporate structures. The state recently updated its original version of an LLC.
Wyoming enacted Bill 38 in 2021, which allows decentralized autonomous organizations (DAOs) to register as a limited liability company (LLC). Wyoming thus laid the groundwork for the legal recognition of DAOs based in the United States. DAOs can also be formed by limited liability companies, according to the law. The law has been described as a watershed moment that allows American entities to organize themselves decentralizedly on the blockchain.
Wyoming also has cheap and plentiful energy sources, making it ideal for crypto mining operations. A 2019 bill (HB 113) that was ratified allows electric companies to negotiate special utility agreements outside of standard rates. According to the law, large mining companies can also purchase power plants and set up cryptocurrency mining operations.
Wyoming’s crypto-friendly legislation has made the state an appealing destination for cryptocurrency firms based in the United States. Meanwhile, individual owners of crypto assets can benefit from Wyoming’s laws by relocating to the state or physically locating their cold storage assets in the state, or by forming their own Wyoming LLC, corporation, foundation, or other business entity. As cryptocurrency gains traction around the world, Wyoming has a good chance of becoming one of the leading areas for the technology to thrive.