Last month, amidst the regulatory uncertainty over the future of cryptocurrencies, the state of Wyoming made a landmark decision towards defining digital assets, and recognizing cryptocurrencies as digital assets. The regulation also allows banks to act as custodians of digital assets, which should draw a lot of interest from legacy banks as most of them have broached the idea of entering the crypto custody business. Asset management major/crypto pioneer Fidelity is already in the crypto custody space.
In addition, other crypto-friendly laws passed concurrently will legalize tokenized security offerings in the state of Wyoming. This is a watershed moment for STOs; tokenized securities have always questions over their legality
. The new law makes the tokenized form of traditional assets as legal as their non-blockchain version of securities. STOs are considered to be a trillion dollar opportunity that can unlock large pools of global liquidity and 24x7 global markets for traditional assets. With doubts around STOs slowly clearing up, we can expect positive developments on the tokenization front. At least that is the ‘money crypto’ narrative. We are cautiously optimistic on STOs, but it will likely take a while, and it is not the 0-to-1 transformation that truly harnesses the complete potential of DLT, as we have opined before
The final crypto law is perhaps the most favorable for both incumbent and prospective crypto businesses and start ups, as it allows crypto-focused businesses, which have been deprived of traditional banking services, to gain access to banking services through the creation of special purpose depository access institutions. During the unexpected crackdown on crypto businesses in late 2017, a lot of startups dealing with digital assets were put out of business as their bank accounts were summarily closed after a compliance review. Banking rails are literally the holy grail for crypto; With banking rails reinstated, Wyoming could quickly become a fertile breeding and stomping ground for crypto businesses. Access to banking channels for crypto companies has been a weak link that has been regularly exploited by regulators and centralized institutions to stifle the growth of cryptocurrencies and their associated disruptive use cases.
In the context of Bitlicense in New York, and the proposed Texas cryptocurrency laws
, Wyoming’s approach to crypto regulation, led by former Wall Street Executive Caitlin Long
, comes as a breath of fresh air. Like Malta, Estonia, Slovakia etc that are smaller nations punching above their weight in crypto, Wyoming has clearly identified the opportunity here and is clearly on to something.