The Wyoming Legislature passed eight new bills regarding blockchain technology in February, and the state’s blockchain task force is expected to stay busy this interim with more legislation.
Senate Minority Leader Chris Rothfuss, a Laramie Democrat, served on the task force in 2018 and, this year, he’ll co-chair the committee alongside Rep. Tyler Lindholm, R-Sundance, who has become the face of pushing for establishing Wyoming as the natural home for companies involved in the fledgling industry, still best known for producing cryptocurrencies like Bitcoin.
“We’ve done great work to make Wyoming a leader in blockchain policy, which will attract companies from all over the world,” Rothfuss told the Laramie Boomerang.
Rothfuss said he expects the task force to produce about six more bills leading up to the 2020 session.
Some see blockchain technology as the greatest innovation in currency since the advent of fiat money, but most countries lack the legal framework needed to allow blockchain companies to thrive.
As the Wyoming Legislature has been working these past two years to pass legislation with blockchain leaders, like Wyoming native and Wall Street alumna Caitlin Long, other states and countries are adopting Wyoming’s blockchain laws often within a year.
Even though Wyoming doesn’t have all the amenities to attract blockchain companies other states might, Rothfuss said he expects companies will still domicile in Wyoming rather than waiting for other states to catch up.
“In the tech industry, the first mover wins — or at least wins for a while,” Rothfuss said. “Being a year ahead really does make a big difference. The people who get through the market first win.”
And while other governments are also now keen to accommodate blockchain, Rothfuss said it will be hard for them to keep up with the Wyoming Legislature’s unusually nimble ability to pass new legislation.
“It’s a challenge to get this many pieces of legislation done,” he said. “They can’t just steal our legislation and copy-and-paste them. They have to make them fit their legal framework. You have to work through all the nuisances so that we don’t break things.”
Other local legislators are also excited for the new blockchain technology while also expressing some concern about cryptocurrency.
Retired banker Rep. Dan Furphy, R-Laramie, was one of only seven members of the House to vote against the bill that creates a new kind of bank, called a “special purpose depository institution,” to do banking for cryptocurrency companies and other ventures the Federal Deposit Insurance Corporation frowns upon.
Like marijuana companies, cryptocurrency businesses often find it hard to receive services from traditional banks, who’d risk losing their FDIC insurance by accommodating the businesses.
“The FDIC feels that cryptocurrency is too risky, and I do too,” Furphy said.
In 2017, the value of one Bitcoin went from less than $1,000 to almost $20,000 in less than a year. Since then, the value has dropped down to $4,000.
Before the “special purpose depository institutions” bill was passed, Furphy was able to ensure the bill was amended so those institutions aren’t officially called “banks.”
Since these new depository institutions aren’t likely to have FDIC insurance and can’t lend like a normal bank, Furphy said it was important for consumers to know there’s a significant distinction.
“I don’t want people perceiving that this is an FDIC-insured bank,” Furphy said. “If you want to put your money in this depository institution, have at it, but just realize that you’re taking the risk.”
The risks, he said, remind him of the savings and loans crisis of the 1980s and 1990s, when a third of the country’s savings and loan associations closed in a ten-year period.
Sen. Glenn Moniz, R-Laramie, also voted against this bill.
“Cryptocurrency has a lot of room for fraud, and the banks are totally opposed to it,” he said.
Rothfuss said it’s important for the public to understand that these new banks won’t be banking cryptocurrency, but will instead be banking the U.S. dollars that cryptocurrency companies need banking for to make payroll.
Still, he wonders how much interest there will be for someone to start a fee-based “special purpose depository institution” that isn’t allowed to lend and is required to hold all of its depository liabilities as liquid assets.
“I’m not sure how that’s going to make any money,” he said.
While Furphy’s skeptical of the new banking structure, he’s enthusiastic about other blockchain-related bills that passed this session, like the bill establishing a “financial technology sandbox.”
That bill allows the state’s banking commissioner or the secretary of state to waive certain statutes or regulations to allow for the testing or innovative financial products or services through a financial technology sandbox program.
“That really helps somebody who has a great idea, so they don’t have to go through all the regulatory hurdles to develop a product in Wyoming,” Furphy said.
In four or five years, Rothfuss said that blockchain won’t be the same buzzword it is today. Other digital technologies will emerge, and Rothfuss said the Legislature’s focus will shift as well, likely with another task force that focuses on advanced technology besides blockchain.
“The Legislature is going to stay ahead on emerging technology, and we hope to repeat this performance with some other technological venues in the future,” he said.