SHERIDAN — Forward Sheridan hosted a discussion about the future of blockchain technologies and cryptocurrencies in the state during its Tech Summit Thursday.
Wyoming passed a package of legislation during the recent budget session that transformed it from one of the most restrictive states in terms of cryptocurrency regulations to the most welcoming.
What that means for the state’s economy, however, remains to be seen.
Jesus Rios, cofounder of Ptolemy Data Systems, a local tech company, and a member of the ENDOW council, said ENDOW supported the blockchain and cryptocurrency legislation as another opportunity for diversification.
“What we did during this last legislative session was say, ‘Wyoming’s open for business,’ when it comes to blockchain technologies,” Rios said.
He pointed out that the potential of the technology has not been fully realized yet, which means it could have wide applications.
Blockchain has been presented as a way to make accounting practices more transparent, build and enforce contracts and even vote.
But with that also comes the potential for fraud and other bad actors.
“Could there be some shady players that come to Wyoming and try to set up shop? Yeah, we should probably expect it,” Rios said. “But we should also probably expect some great success stories as well.”
Matt Kaufman, a Cheyenne lawyer who was recently appointed to the state’s Blockchain Task Force by Gov. Matt Mead, said the legislation package the state passed has certainly created new opportunities, but the immediate effect may be more modest than some have anticipated.
Kaufman said House Bill 70, which provided companies offering cryptocurrencies with securities exemptions, was the most significant legislation passed when it comes to the future of cryptocurrency in the state.
Cryptocurrencies have traditionally been regulated as securities with the Securities and Exchange Commission. Every security needs to be registered with the SEC, unless it is granted an exemption, and that registration process is expensive. The legislation Wyoming passed lets companies distributing cryptocurrency tokens operate in the state with an exemption, provided those companies register with the secretary of state, are selling “utility tokens” — which means the tokens are intended to be used as currency, rather than as investments — and the tokens cannot be sold to additional buyers as financial investments or marketed as financial investments.
This act also exempts sellers from being regulated as broker-dealers, provided, again, they register with the secretary of state and reasonably believe the token conforms with the act.
“What this all means is now our Wyoming secretary of state has been thrust into the position of examining these crypto-token filings to determine whether or not they [conform] with the act’s statutes,” Kaufman said.
Wyoming is the first state, and one of the first places in the world, to create an exemption for cryptocurrency tokens. Despite that, the state has not seen much new business as a result.
“[The legislation] made an enormous splash in the cryptocurrency world,” Kaufman said. “…But in my estimation, it’s been a pretty tepid response in terms of companies rushing here.”
Kaufman said so far six companies have filed with the Wyoming Secretary of State’s Office under the new act.
“Almost every one of the filings, all but one, are operating under the assumption that if I file in Wyoming, and it’s a token offering…I can go sell to the world and I’m exempt from securities laws,” Kaufman said.
That assumption, however, is wrong. Kaufman added that as soon as a company decides to sell tokens outside Wyoming state lines, the exemptions no longer apply.
“That’s a really, really, really important point that I don’t think our legislators understood,” Kaufman said. “And that’s not to say this (act) isn’t cool, because it’s very cool and it’s very useful. But it’s pretty limited in scope.”
That said, there are companies that understand the limitations of Wyoming’s new law and are still choosing to move to the state. Kaufman said some of these companies see Wyoming as an opportunity to test their business on a small scale. Additionally, there is optimism that nearby states will enact similar legislation in the coming years, and some companies are looking to get an early foothold in the region.
Kaufman stressed, however, that it is unlikely a company would be able to set up in Wyoming with securities exemptions and convince the SEC to extend those exemptions beyond the state; without exception, the SEC has treated every token offering it’s looked at as a security.
“That’s why there is a lot of risk for these companies, and I think that’s why we’re not seeing this explosion of companies moving here,” Kaufman said.
Though the legislation has given Wyoming a head start, it has not given the state a monopoly, and several other states are racing to catch up.
Going forward, Kaufman said Wyoming is going to have to find ways to build on the laws it’s passed.
“I don’t want to take anything away from [the legislation that was passed], because it was incredibly forward looking, but we’ve got to quickly find a way to capitalize on that,” Kaufman said.
Much like the technology itself, the future of blockchain technology and cryptocurrencies in Wyoming is still taking shape.