In June, Blockchain Beach covered an event discussing the ongoing innovations for regulatory compliance in the State of Wyoming pertaining to Blockchain and Crypto. We wanted to share an update from the Digital Asset Trade Association that was posted today on their Medium account:
The Digital Asset Trade Association (DATA) was formed with the mandate to work closely with local and national governments to enact consistent ground-breaking legislation focused on Distributed Ledger Technology (blockchain technology and cryptocurrencies). We hit our stride last year working closely with the Wyoming Blockchain Coalition to shepherd along 5 pro-blockchain and crypto-friendly laws, revamping money transmitter laws and defining utility tokens for the first time in US law.
There are now five new crypto bills proposed in the 2019 Wyoming legislative calendar, one of which, 219LSO-0055 (Special Purpose Depository Banks), allows chartered banks to provide banking services to blockchain-based customers. According to the legislative document, the bill would create a new banking category called the Special Purpose Depository Bank — a group of financial institutions that “shall” provide banking services to blockchain-based businesses.
Today, we are proud to announce two new DATA working groups to support this effort and create a crypto/blockchain friendly Special Purpose bank in Wyoming. One group will be focused on financial considerations creating the new institution and the other will be focused on crypto/blockchain policies needed to make the initiative a success.
As background, this bill was passed nearly unanimously by the state’s powerful Minerals, Business & Economic Development Committee by 13–1 at the end of 2018, and it seeks to remedy the banking challenges faced by blockchain companies, including account freezes and unexpected account closures. “The rapid innovation of blockchain technology, including the growing use of virtual currency and digital assets, has resulted in many blockchain innovators being unable to access secure and reliable banking services, hampering the development of blockchain services and products in the marketplace,” the bill states.
Traditional banks have not been welcoming to blockchain-based companies depriving them of services due to the strict federal banking regulations, principally by the Federal Deposit Insurance Corporation (FDIC).
“Authorizing special purpose depository banks to be chartered in Wyoming will provide a necessary and valuable service to blockchain innovators” the bill states. But make no mistake, the Special Purpose Depository Banks are still strongly regulated by the State’s Banking Commission and must comply with all Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements. Additionally, the banks are expected to maintain equal reserves with the value of the deposits stored, which is above the fractional reserves (usually 8% to 10%) kept by traditional banks. “At all times, a special purpose depository bank shall maintain liquid assets valued at not less than one hundred percent (100%) of its depository liabilities,” the bill states. This condition comes with a cost, deposits kept with a Special Purpose Depository Bank will not be insured by the FDIC.
There are other requirements in the bill to ensure compliance and depositor safety: the account holder must be a business, not a personal account; be a good corporate citizen within the US — have no issues with the jurisdiction in which the entity is registered; maintain a deposit of at least $5,000 USD; and, adhere to both Wyoming and Federal laws and regulations.
Apart from the above conditions, account holders can be from any of the 50 states. The bill also outlines that the bank is prohibited from lending or allowing overdrafts and must maintain 100% of its deposits in liquid assets — which would be United States Dollars or United States treasury bonds. Furthermore, the bank must “maintain appropriate insurance or a bond covering the operational risks of the bank” as “deposits are not insured by the federal deposit insurance corporation.”
Overall, DATA is continuing to move the legislative needle in multiple states and on the federal level and we are excited to continue our work in Wyoming! Will this bill become law? For that, stay tuned!