CHEYENNE – Wyoming could soon become the first state to establish property rights for owners of cryptocurrency and other “virtual assets” under commercial law.
Senate File 125 would clarify the legal status of digital money, such as bitcoin, in Wyoming and create a framework for banks to hold these assets in trusts.
It’s one of a handful of bills designed to diversify Wyoming’s economy through blockchain technology, an effort that began in earnest last year.
The bill would subject cryptocurrency to some of the same rules as money by expanding existing laws to include virtual assets and securities.
If passed, bitcoin, for example, could be considered personal property in bankruptcy proceedings.
“A judge would have a roadmap to determine how these assets should be treated,” said Wyoming Blockchain Coalition member Caitlin Long. “Digital assets don’t have a lot of clarity under the Uniform Commercial Code – a state law defining property – because it was designed when property was all tangible.”
It would also provide clearer rules for investors using and trading cryptocurrency.
Unlike money, cryptocurrency is not backed by the U.S. government. This means laws are vague, and investments can be riskier.
That’s why the proposal has so many in the industry excited. Sponsors say the bill could both validate the technology and give Wyoming a competitive edge.
“Big institutions want to go places where the law is really clear,” Long said. “These companies are operating in a legal gray area. I think, if we look back on this in five years, there will be a pretty meaningful impact to the State of Wyoming’s general fund and jobs on the ground.”
The bill would also clarify how banks can hold digital assets in trusts.
Long said cryptocurrencies would be treated as “digital collectibles,” similar to fine art or a rare automobile. Banks could opt into the agreement.
“No one would be depositing bitcoin in the bank itself,” Long said. “It’s not like depositing a paycheck in a bank account. The trust department just holds the assets for the benefit of the customer.”
Banks would still be subject to federal anti-money laundering laws.
“This provides a regulatory framework that investors and banks need to use the virtual currency in a meaningful way,” said the bill’s main sponsor, Sen. Tara Nethercott, R-Cheyenne. “It’s the next step for virtual currency. How it can attract legitimate business to Wyoming is profound.”
Cryptocurrency investors say the U.S. Securities and Exchange Commission often prefers banks oversee digital assets, as opposed to other financial institutions.
Wyoming Banking Commissioner Albert Forkner hadn’t reviewed the bill for comment by press time.
“The proposed activity is something new for community banking that we need to research,” he said.
Long said the legislation would set a precedent for other states exploring how to legally define cryptocurrency. This, and the other blockchain bills moving through the Legislature, could position Wyoming as an industry leader.
“The chance of other states catching up to Wyoming is very slim because of what we did last year and what’s proposed this year,” she said. “Arizona copied our bills last year, and Colorado is copying our bills this year. Nevada called the Legislative Service Office and asked for our bank bills. There is a first-mover advantage to this.”