The Cowboy State Tames Bitcoin’s Regulatory Wild West

In 2020, Kraken, a platform for exchanging cryptocurrencies such as Bitcoin, became the first cryptocurrency company to secure a bank charter in the United States, signifying the cryptocurrency industry’s growing mainstream acceptance.

In 2019, a new Wyoming law established Special Purpose Depository Institutions that permits cryptocurrency companies to create financial institutions resembling custodian banks, which focus on holding assets for clients.

SPDIs operate under several conditions that other banks typically do not.

For example, after Wells Fargo stopped processing cryptocurrency exchange Bitfinex’s transactions, Bitfinex turned to a Panamanian company that later allegedly lost $850 million worth of Bitfinex funds.

They may, for instance, prefer to pursue SPDIs over working with third-party banks that could later de-platform them in response to political pressures.

And the state’s SPDI Act allows companies to apply to join the Federal Reserve System, bringing them closer to larger payments networks.

Moreover, being a bank in a growing industry could prove profitable to cryptocurrency companies.

Meanwhile, Wyoming’s Digital Asset Act classifies cryptocurrencies as property under existing laws and clarifies that the Uniform Commercial Code applies to cryptocurrencies, offering users greater regulatory clarity in business.

But New York has so far attracted few applicants, acquiring instead a reputation as a state with onerous regulatory hurdles.

Wyoming’s approach, however, may ultimately inform a federal strategy, as recently elected U.S.

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