Wyoming has undergone many crypto-relevant legislative changes within the past month, most of which could have national implications. The Wyoming State Legislature passed HB-70, which was later signed into law by Governor Matt Mead, exempting cryptocurrencies from national securities regulations so long as they meet the list of requirements necessary to be considered a “utility token.”
A utility token requires that:
- The token cannot be marketed as an investment opportunity. Even if the token will increase in value later it cannot be sold on the premise of this.
- The token is exchangeable for goods or services. This implies that the tokens must offer a working product or service before they are offered.
- The developer has not entered a repurchase agreement or entered into an agreement to locate buyers for the token.
The security token legislation was passed unanimously by the house with a 60-0 vote, and Co-Founder of the Wyoming Blockchain Coalition, Caitlin Long, mentioned this is an important precedent set by the state. She said that “Wyoming is the first elected body to define a utility token as a new type of asset class different from a commodity or a security.” This decision contradicts previous findings from FinCEN and the SEC which define cryptocurrencies as commodities and securities respectively, meaning there could be a distinct regulatory framework in the future of cryptocurrencies, depending on whether they occupy a security or utility space. It is no debate, however, that in Wyoming tokens following the aforementioned requirements are considered utility tokens rather than securities, and are subject to state law rather than federal regulation.
We believe this precedent set by the state of Wyoming will create a framework for the future regulatory work of agencies in Washington D.C. hopefully leading to more comprehensive assessment of digital token-based assets.
House Bill 70 was closely followed by other submissions to the Wyoming state legislature. The blockchain relevant bills were HB-19, HB-101, HB-126, and Senate Bill 111 (SB-111), all of which passed the state legislature unanimously. They are detailed below.
House Bill 19 was passed into law and revised the state money transmission laws that previously hindered cryptocurrency exchanges from operating in the state. Coinbase and others had previously withdrawn operations from the state due to their regulation, but plan to return in light of the approval of HB-19.
House Bill 101 was approved on March 7th by the State Senate and authorizes corporations based in the state to create blockchains for record storage and shareholder identification. This legally allows the automated acceptance of shareholder voting conducted through blockchain.
This allows Limited Liability Corporations to establish compartmentalized series of members and managers, transferable interests and assets, and the distribution of those interests and assets to members.
Senate Bill 111 was signed into law on March 8th and exempts cryptocurrencies from Wyoming State property taxes, which is in direct contradiction of the prior SEC regulation mandating cryptocurrencies be considered property for taxation purposes.
In light of this legislative expansion the Square Cash App, previously known for sending fiat currency between users, has added a Bitcoin (BTC) sending option for its users. The app plans to add the option for its New York customers as well after it’s application process for New York’s BitLicense is (hopefully) approved. The company also plans to add Georgia and Hawaii in addition to New York and Wyoming, however, Wyoming is currently the only state guaranteed to approve of the company’s services.
Hopefully the steps that Wyoming is taking to become a technological hub spread throughout the U.S. and to the highest levels of government. Until we determine the national solvency of these legislative acts, SEC and CFTC compliance in all other states is a requirement for all cryptocurrency businesses. But, the future of the regulatory landscape is bright for cryptocurrencies, and the inevitable simplification of government practices can only mean market expansion.
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