The Bison is Bullish: Wyoming’s Blueprint for Welcoming Crypto

In the context of innovation and industry, certain states carve out niches that set them apart. 

Delaware, for example, has long been recognized as the corporate haven of the United States, attracting over 66% of Fortune 500 companies due to its business-friendly laws, including the Delaware General Corporation Law, which provides a flexible legal framework for corporations. The state offers significant tax advantages, such as no sales tax and exemptions for out-of-state income, and maintains privacy for business owners by not requiring disclosure of directors or officers. 

In a parallel development, Wyoming is emerging as a Delaware for cryptocurrency and blockchain operators. Wyoming’s pioneering legislative framework and welcoming environment for decentralized autonomous organizations (DAOs) and crypto enterprises makes it an obvious place to consider incorporating your crypto venture.

In this deep dive, we’ll explore how: 

1. The new Decentralized Unincorporated Nonprofit Association Act makes it easier to operate DAOs. 

2. Wyoming's Special Purpose Depository Institutions (SPDIs) charter allows crypto companies to operate as banks, providing them with access to banking services traditionally unavailable to the industry.

3. The state has passed laws exempting certain digital assets from state property taxes.

4. Wyoming has established a regulatory sandbox for fintech companies, including those in the crypto space, to test innovative products and services without immediately being subject to full regulatory requirements.

5. The state has clarified the legal status of digital assets, distinguishing between securities and utility tokens, providing clarity for businesses operating in the crypto space.

Broadly, Wyoming's blockchain-friendly legislation extends beyond DAOs, encompassing a range of areas such as tokenization of assets, smart contracts, and blockchain technology applications in various industries.

Wyoming legislates from the front with DAO-friendly DUNA act

The new Decentralized Unincorporated Nonprofit Association (DUNA) Act in Wyoming, signed by Governor Mark Gordon, provides a legal framework for DAOs with at least 100 members to become unincorporated nonprofit associations. This is critical to allowing DAOs to engage in profit-making activities while directing all proceeds back to achieving the nonprofit's purpose. This law goes into effect on July 1, 2024, and enables DAOs to acquire and transfer property, including tokens.

This legislation stands out for two reasons. First, it matters to DAOs as it offers them a formal legal structure and recognition as nonprofit entities, granting them the ability to operate within the bounds of applicable laws without compromising their decentralization. Secondly, and perhaps more importantly, it demonstrates Wyoming’s intent and ability to not only understand the nuances of crypto, but legislate it.  By providing clarity on how DAOs can function as nonprofits and engage in profit-making activities while maintaining their nonprofit purpose, Wyoming's new law creates a conducive environment for DAOs to operate legally and transparently. 

This legal framework ensures that DAOs can manage their operations effectively, acquire necessary assets, and conduct transactions in compliance with regulatory requirements, enhancing their credibility and sustainability within the evolving landscape of decentralized organizations and crypto operations.

Wyoming's progressive stance on DAOs contrasts with other states imposing stricter regulations on blockchain companies, such as mandatory money transmitter licenses and adherence to securities laws. While Utah shows similar openness by accepting digital asset payments and enacting its DAO law, states like Florida and the District of Columbia have tightened regulations around cryptocurrency transactions. This diverging regulatory landscape highlights Wyoming's unique position in fostering a more blockchain-friendly environment.

Wyoming's SPDI charter bridges crypto companies and banking services

Wyoming's Special Purpose Depository Institutions (SPDIs) charter allows crypto companies to operate as banks. Through establishing fully-reserved banks that receive deposits and engage in activities incidental to banking, such as custody, asset servicing, fiduciary asset management, the SPDI charter empowers crypto operators with access to banking services traditionally unavailable to the industry.

These SPDIs focus on digital assets like virtual currencies, digital securities, and digital consumer assets, offering services such as custodial services for digital assets and authorized transactions on behalf of customers. Wyoming's regulations tailored to digital assets address technology controls, transaction handling, and custody operations for digital assets, ensuring compliance with state laws defining digital assets in conjunction with the Wyoming Uniform Commercial Code.

One key aspect of the SPDIs is that they are fully-reserved banks prohibited from making loans with customer deposits of fiat currency. They must maintain customer deposits of fiat currency backed 100% or more by unencumbered liquid assets like U.S. currency and high-quality liquid assets. While not required to obtain insurance from the Federal Deposit Insurance Corporation (FDIC), they may choose to do so. 

This charter allows crypto companies to engage in banking activities within a regulated framework, providing them with access to essential banking services while complying with state laws tailored to digital assets. It offers a unique opportunity for crypto businesses to operate as banks under specific regulations designed to address the complexities of digital assets and ensure financial stability within the industry.

Wyoming's fintech sandbox fuels blockchain and crypto innovation

Wyoming has established a regulatory sandbox for fintech companies, including those in the crypto space, to test innovative products and services without immediately being subject to full regulatory requirements through the "Financial Technology Sandbox Act." This act allows companies to test innovative financial products and services, including those focused on blockchain and cryptocurrencies, for up to two years with the possibility of a 12-month extension before needing formal licensure. The sandbox program is open to various financial products and services, providing a controlled environment for testing new technologies and business models within the financial sector

Key features of Wyoming's regulatory sandbox include:

• Allowing companies to test innovative financial products and services without immediately needing full licensure.

• Providing a controlled environment for testing new technologies related to finance, including blockchain and cryptocurrencies.

• Granting waivers of specified statutes or rules under certain conditions.

• Authorizing limited waivers of regulations by the state banking commissioner and secretary of state.

• Requiring approval or denial of sandbox applications within 90 days of submission.

• Enabling the testing of innovative financial products or services with consumer protection in mind.

Overall, Wyoming's regulatory sandbox offers a supportive framework for fintech companies, including those in the crypto space, to innovate and test new financial products and services while ensuring consumer protection and compliance with regulatory requirements.

Wyoming's property tax exemptions boost the state's crypto ecosystem

Wyoming has passed laws exempting certain digital assets from state property taxes, providing a favorable environment for digital asset owners and businesses. Digital assets, including cryptocurrencies, are exempted from Wyoming state property taxes, offering a significant advantage to individuals and companies holding these assets within the state. This exemption aligns with Wyoming's broader efforts to attract blockchain businesses and development by creating a regulatory environment that supports innovation and growth in the digital asset industry. 

By exempting digital assets from property taxes, Wyoming distinguishes itself as a crypto-friendly state that recognizes the unique nature of digital assets and aims to provide a conducive ecosystem for their ownership and utilization. This exemption not only benefits individual digital asset owners by reducing their tax burden but also incentivizes businesses operating in the digital asset space to establish a presence in Wyoming, leveraging the state's favorable tax treatment for digital assets. 

Wyoming provides crypto clarity with digital asset legislation

Wyoming has clarified the legal status of digital assets by distinguishing between securities and utility tokens, providing clarity for businesses operating in the crypto space through legislation such as the 2019 SB-125. This bill interpreted digital assets within the existing Uniform Commercial Code (UCC) and authorized a unique security interest status for digital assets, offering a foundational legal framework for businesses dealing with digital assets. The state has categorized digital assets into three classifications: digital securities, digital assets, and virtual currencies, each with distinct legal implications.

By defining and governing digital assets specifically, Wyoming has created a clear regulatory environment that differentiates between various types of digital assets, ensuring that businesses understand the legal status and requirements associated with each category. This distinction is crucial for businesses operating in the crypto space as it provides them with guidance on how to navigate regulatory compliance and legal obligations when dealing with different types of digital assets. Wyoming's proactive approach to clarifying the legal status of digital assets contributes to creating a transparent and supportive ecosystem for businesses involved in blockchain technology and cryptocurrencies.

Integral can help navigate all these decisions and more

The application of blockchain technology in Wyoming is not confined to financial services. The state's legislation encourages the use of blockchain across different sectors, including supply chain management, healthcare, real estate, and more. This broad legislative support underscores Wyoming's commitment to fostering a comprehensive blockchain ecosystem, where diverse applications of the technology can thrive, innovate, and contribute to the state's economic growth.

At Integral, we’re thrilled to see governments do their research and provide bold proposals that encourage entrepreneurs to bring web3 projects in state. Whether you’re exploring a new application or unpacking your banking needs, Integral we can help. Integral's platform not only enhances accounting processes but also provides valuable features like automated bookkeeping, real-time treasury insights, streamlined taxes, auditable records, and customizable accounting policies tailored to web3 organizations