BY: Melissa Pereira, RBFL Student Editor
Cryptocurrency (“Crypto”) financial technology may be the future of transacting. However, there are regulatory obstacles to overcome before widespread adoption and usage can be achieved. My developmental article extensively discusses these regulatory obstacles, the need for a clear regulatory framework of crypto, Wyoming’s leadership in implementing crypto-friendly regulation, as well as anticipations for the future of digital asset regulation.
There are thousands of crypto technologies, and many vary in their function, goals, and codes. Issues arise when trying to reconcile crypto technology with the current regulatory framework. It is unclear which existing laws are applicable to crypto and there is uncertainty regarding which regulatory authority should govern the trading and transfer of digital assets, thus causing confusion and ambivalence among market participants and regulators. The complexities of the technology and wide variance in function of cryptos may help to explain why it is so persistently unclear. Having regulation in the crypto space will not only facilitate efficient and stable operations of crypto transacting, but also increase consumer protection and crypto usage.
The state of Wyoming is gaining a reputation as “Cryptocurrency’s Wild West” because of their leadership in passing crypto-friendly laws, and because these new laws are attracting many crypto companies to the state. There are several elements and nuances to the groundbreaking crypto-friendly Wyoming legislation, which can be broken down into three primary parts: First, the legislation provides clear definitions of the technology and divides blockchain based assets into three different categories of personal property assets. Secondly, the legislation establishes and recognizes an LLC entity formation for blockchain technology known as decentralized autonomous organizations (DAOs). Lastly, it allows for the chartering of special purpose depository banking institutions, which enable banks to provide regular banking services as well as blockchain based services to customers.
Wyoming’s crypto-friendly legislation provides more consumer protection and investment security, as well as an easier means of acquiring digital assets. These regulations give crypto companies a better understanding of their legal status and it will likely decrease operational risk and uncertainty. Less risk will not only incentivize consumers to invest and engage with crypto technology, but also encourage crypto companies to continue operating and innovating toward the future of digital asset technology.
As for the future of crypto regulation, Wyoming’s leadership may have spawned other states to follow in their legislative footsteps. Other states may be attracted to the crypto industry to create jobs and capital for the state or to stay on pace with the emergence of this innovative technology. Regardless of what particularly attracts a state to crypto legislation, many states will consider adopting crypto legislation in 2021 and 2022, according to the National Conference of State Legislators.
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Jimmy Aki, Wyoming Passes Bill to Secure Banking Relations for Blockchain Companies, Bitcoin Magazine (Dec. 3, 2018), https://bitcoinmagazine.com/culture/wyoming-passes-bill-secure-banking-relations-blockchain-companies [https://perma.cc/5ALM-4NVA]
Gina Chon, Cryptocurrency’s Wild West in Wyoming, Reuters, (Jul. 7, 2021), https://www.reuters.com/breakingviews/cryptocurrencys-wild-west-is-wyoming-2021-07-07/ [https://perma.cc/SMG6-YEAM]