The state of Wyoming has historically been a leader in progression and innovation when it comes to legislation. Also dubbed the “Equality State,” it was the first to grant women the right to vote1, the first to elect a female governor2, and home of the first Limited Liability Company (“LLC“), creating the Wyoming Limited Liability Act in 19773. As the digital asset industry dominated the world over the last decade, Wyoming once again took a regulatory lead by becoming “the only US state that provides a comprehensive, welcoming legal framework that enables blockchain technology, both for individuals and companies,” earning the title of the most crypto-friendly state in the US.4
In 2018, Wyoming passed five bills tailored to digital assets, initiating an aggressive push toward adopting supportive and progressive cryptocurrency regulation.5 By the end of 2019, the state had thirteen new laws, (the “Blockchain Bills”), laying the foundation of their digital asset regulation. The Blockchain Bills amended various existing statutes to include crypto-specific language and term definitions and introduced new rules that encompass the unique aspects of the industry. Significant highlights include the exemption of cryptocurrencies from property taxes, the recognition of blockchain signatures and smart contracts as legal documents and the creation of the “utility tokens” asset class. Since then, the state has passed a total of 24 pro-crypto laws, making it clear that it is committed to promoting this burgeoning industry.
Here’s a look at some of the most significant laws framing Wyoming as the go-to destination for all things crypto.
What are the Wyoming Crypto Laws?
The Origin of the “Blockchain Bills”
In 2015, Caitlin Long, a former managing director at Morgan Stanley, attempted to give a Bitcoin donation to her alma mater, the University of Wyoming but was met by many legal roadblocks, which sparked her interest in the regulatory environment of cryptocurrency in the state. Long took her concerns to state legislators and joined forces with Representative Tyler Lindholm, now Co-Chairman of the Wyoming Blockchain Task Force6; with the help of various legislators and entrepreneurs, they enacted 13 blockchain laws that have shaped Wyoming into a “mecca” for cryptocurrency businesses.7
Hb19: Wyoming Money Transmitter Act – Virtual Currency Exemption
In 2015, US crypto-exchange Coinbase ceased operations in Wyoming, preventing residents from buying and exchanging cryptocurrencies due to the intense regulations outlined in the Wyoming Money Transmitter Act8 (referred to herein as “The Act“). The Act requires cryptocurrency exchanges to obtain a license and maintain fiat reserves to back 100% of their crypto holdings, meaning compliance would require an exchange with $1 billion in Bitcoin holdings to maintain cash reserves of $1 billion USD.9
Enter: House Bill 19 (“HB 19“): The Virtual Currency Exemption to The Act. Enacted in 2018, HB 19 modified The Act to exempt virtual currency, allowing entities that facilitate or participate in virtual currency transactions to operate in Wyoming without a license, as previously required under The Act. The term “virtual currency” is defined as “any digital representation of value that is used as a medium of exchange, unit of account or store of value; and is not recognized as legal tender by the US government.”10
HB70: Open Blockchain Tokens Exemption
Initial Coin Offerings (“ICOs“) began gaining traction in 2017 as blockchain startups took advantage of the burgeoning interest in cryptocurrencies to raise millions of dollars in funding. That year, ICO funding raised a total of $10 billion. This figure rose to $11.4 billion in 2018 as more and more companies turned to this fundraising method. In fact, 2018 saw more money raised through ICOs than traditional venture capital financing for blockchain startups.11 Due to the uproar, the Securities Exchange Commission (“SEC“) issued an 18-page investigative report, known as the DAO Report, announcing that the digital coins sold through an ICO could classify as securities subject to the federal securities laws under the Howey test.12
Wyoming House Bill 70 (“HB 70“), introduced in 2018, added a new section to the Wyoming Securities Act (the “WSA“). The new section classifies cryptocurrency tokens as utility tokens and defines “open blockchain token” as a digital unit that is:
(i) Created in response to the verification or collection of transactions on a digital ledger or through specified computer code;
(ii) Recorded in a digital ledger or database which is chronological, consensus-based, decentralized, and mathematically verified; and
(iii) Capable of being traded or transferred without an intermediary.13
Under HB 70, a person who develops, sells, or facilitates an open blockchain token exchange is not issuing a security under state law and is exempt from the WSA as long as the following statements are true:
(i) the developer, seller, or facilitator files a notice of intent with the secretary of state;
(ii) the token is issued for consumptive purposes and only exchanged for goods, services, or content; and
(iii) the developer or seller of the token did not sell the token as a financial investment.
HB101: Electronic Corporate Records
House Bill 101 (“HB 101“) amends the Wyoming Business Corporations Act to authorize Wyoming corporations to conduct various operations on electronic networks, such as the blockchain. This amendment allows corporate and shareholder records to be created and maintained on the blockchain, providing a transparent and immutable transaction history. The bill also authorizes companies to assign unique data addresses to each shareholder that serve as anonymous access keys to their private data. These private keys hide a user’s identity and personal information, protecting their privacy while involved in a public transaction. The company can accept these keys as identity confirmation to accept shareholder votes, provide notices, or transfer shares. 14
HB 101 was a significant win for Wyoming corporations as the implementation of blockchain technology began to revolutionize business practices.15 The decentralized, public network enhances a company’s integrity and data security and creates trust in the “trustless network.” When transactions are recorded on the blockchain, data is permanently stored across a network of computers and becomes a publicly accessible and auditable digital “paper” trail. That record cannot be altered or erased and isn’t under the control of a central authority, issuing full transparency and validity; the trust is built by the network. A shareholder’s private key protects the identity of shareholders and their personal information, and the immutability of data records helps prevent fraud or hacks, allowing both parties to feel confident in their privacy in security.
HB0126: Limited Liability Companies – Series
House Bill 126 (“HB 126“) is most favorable to decentralized protocols and intends to highlight Wyoming as the “jurisdiction of choice” for securities formation. HB 126 modified Wyoming’s Corporate Code authorizing LLCs to establish a series of members, managers, transferable interests, or assets treated as a separate unit of LLC, where such interests or assets may be digital. The bill provides liability protection to a series if the record of assets for each series are maintained separately and the limitations on liability are stated in the Operating Agreement and the LLC Articles of Organization.16
SF0111 Property Taxation- Digital Currencies
Wyoming Senate File 111 (“SF 111“) amends the Wyoming Taxation and Revenue Act (“WTRA“) to exempt virtual currency from property taxation. The term “virtual currencies” is defined as any digital representation of value used for exchange, accounting, or storing value and not recognized as legal tender.17 Effectively, this means that any crypto transactions made in the state will not be subject to state taxes; however, they are still subject to federal taxes. Wyoming also has a sales tax exemption for mining equipment for buyers who have mined less than $5 million worth of coins.18
The 2019 Special Purpose Depository Institutions Act
On February 26, 2019, the Special Purpose Depository Institutions Act (“HB 74“) was signed into law to provide blockchain innovators with digital assets and virtual currency-related banking services that traditional banks couldn’t offer. HB 74 created a new form of a state bank, “special purpose depository institutions” (“SPDIs“), to meet the specific needs of blockchain innovators, mandating that an SPDI must hold 100% of deposited assets and prohibiting them from any form of lending.19
Kraken Financial, a cryptocurrency trading platform that allows for the exchange of digital assets into national currencies, announced on Sep. 16, 2020, that Wyoming accepted the company’s application to establish Kraken Bank, the world’s first SPDI. The announcement stated that Kraken Bank will be the “first digital asset company in US history to receive a bank charter recognized under federal and state law and the first regulated, US bank to provide comprehensive deposit-taking, custody, and fiduciary services for digital assets.”
David Kinitsky, CEO of Kraken Bank, said:
“We’re thrilled to work in a state so aligned with our philosophy and values. Wyoming is a rare and shining example of how thoughtful regulation can drive innovation for FinTech companies.”
Kinitsky tells us that by becoming an SPDI, Kraken Bank can act as a national money transmitter without obtaining a license from those states that require one. The bank will offer traditional banking services and digital asset custody, integrate with federal payment systems and create new financial products such as cryptocurrency-backed debit cards, retirement accounts, and wealth management services.20
HB0062: Wyoming Utility Token Act – Property Amendments.
HB 62, coined the “Wyoming Utility Token Act,” amends and clarifies 2018 HB 70 by classifying utility tokens with consumptive characteristics as intangible personal property, therefore do not require a securities exemption. The bill provides guidance relating to notices of intent, including a one thousand dollar ($1,000.00) filing fee, and classifies violations of this act as unlawful trade practice. This bill also effectively moves the provisions outlined in HB 70 into a new chapter of Wyoming Statutes specific to digital assets.21
SF0125: Digital Asset Existing Law
Senate Filing 0125 (“SF 125“) establishes the legal nature of digital assets within existing law, dividing these assets into three categories of intangible personal property: (i) digital consumer asset, (ii) digital securities, and (iii) virtual currency and applies the rules of commercial law to virtual currencies. SF 125 authorizes state banks to provide custodial services for digital assets, consistent with the SEC’s qualified custodian requirements and imposes a supervisory fee on banks providing custody services for digital assets. The term “custodial services” is defined under SF 125 as “safekeeping and management of customer currency and digital assets the exercise of fiduciary and trust powers as a custodian, including fund administration and execution of customer instructions.” This act also outlines a digital asset-specific method of perfection based on control.22
Wyoming Senate Bill 38: The Wyoming DAO Supplement
Wyoming Senate Bill 38, coined ‘The DAO Supplement,’23 was signed into law on Apr. 21, 2021, by Governor Mark Gordon.24 The bill allows decentralized autonomous organizations (“DAOs“) to act as LLCs in Wyoming and is the first state law to address DAO governance and regulation.
The DAO Supplement defines a DAO as a Wyoming LLC whose articles of organization contain a statement noting its designation as a DAO. By recognizing DAOs as a legal entity as defined under this statute, members thus have liability protection, a concern not previously addressed. They are waived of fiduciary duties, subject only to an implied contractual covenant of good faith and fair dealing. As a result, members of a Wyoming DAO LLC now have more contractual freedom and a legal safety net. The DAO Supplement also shields DAOs from being treated as general partnerships in legal disputes. A DAO can either be member-managed or algorithmically managed as defined in the articles of organization. The bill clarifies that algorithmically managed DAOs may only form if the underlying smart contracts can be updated, modified, or upgraded.
The requirements for a DAO to be considered as a DAO LLC are as follows:
- Each DAO must include a publicly available identifier for any smart contract directly used to manage, facilitate, or operate the DAO in its articles of organization.
- The registered name for a DAO shall include wording or abbreviation to denote its status as a decentralized autonomous organization, specifically “DAO,” “LAO,” or “DAO LLC.”
- The articles of organization must include a statement that establishes how the members will manage the DAO and to what extent it will be algorithmically managed.
- The Articles of Organization must be amended if there is:
- a name change of the DAO,
- a false or erroneous statement in its Articles of Organization, or
- an update or change to the DAO’s smart contract.
- The DAO LLC must continuously maintain a registered agent in Wyoming.
Conclusion
The state of Wyoming has been a driving force in making it easier for financial institutions to enter the cryptocurrency industry. By creating practical and easy-to-understand laws, Wyoming has become a beacon for other states hoping to attract blockchain businesses. The tax benefits and business-friendly environment make Wyoming an ideal place to incorporate a money service business that deals with cryptocurrencies. If you are interested in entering the world of blockchain or cryptocurrency, speak to a specialized attorney who can walk you through everything Wyoming has to offer.
Wyoming Crypto Laws: FAQ
Do you need to live in Wyoming To Benefit From Its Blockchain Laws?
Unless you want to establish a Wyoming bank or custodian, you don’t need to live in the state to benefit from its crypto-friendly laws. Attorneys and law firms specializing in digital assets, such as Montague Law, can help you learn how Wyoming’s blockchain and cryptocurrency laws can apply to you.
How Can Individuals Benefit From The Wyoming Blockchain Laws?
Individual owners of digital assets can benefit from the crypto-friendly laws of Wyoming by relocating either yourself or your cold storage digital assets to the state of Wyoming. You can also set up your own Wyoming LLC, corporation, trust, foundation, or other business entity.
How does Wyoming Help Crypto Companies?
There are three ways for your company to benefit from Wyoming’s crypto laws:
(1) physically locate your business in Wyoming,
(2) legally register your company as a Wyoming business entity, or
(3) name Wyoming your “Choice of Law” in any business contracts involving digital assets.
Choosing Wyoming as your entity jurisdiction means you will have no corporate income tax, low registration and annual fees, and increased asset protection. If you are thinking of creating a blockchain business or already own one and want to learn more about applying Wyoming law to your business, contact a digital asset attorney to help guide the process.
Does Wyoming Tax Cryptocurrencies?
Crypto currency in Wyoming is tax-free at the state-level. Wyoming has no state taxes on crypto earnings, transactions, personal income, corporate income, gifts, tax, or inheritance. However, depending on the type of transaction, crypto may be subject to Federal taxes even if you reside in the state of Wyoming. It is important to do your due diligence before participating in any crypto-related transaction to be sure you are adhering to the correct and applicable laws.
How Can I Buy Crypto In Wyoming?
There are multiple exchanges in Wyoming where you can buy coins like Ethereum (ETH) and Bitcoin (BTC). Be sure to compare exchanges, choose your preferred platform, and verify that it’s available in Wyoming. Generally, the steps to signing up for a crypto exchange include the following:
- Creating an account
- Complete the Know Your Customer (“KYC“) requirements by verifying your identity
- Connect a Digital Wallet
- Deposit Funds
Wyoming also has 20 registered Bitcoin ATMs where you can buy Bitcoin on the go, with the most popular locations being Casper (6 ATMs), Rock Springs (3 ATMs), and Cheyenne (1 ATMs).
The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Securities law is complex and highly fact-specific to any given circumstance, and readers should contact an attorney for advice regarding any legal matter.
1 Women’s Suffrage and Women’s Rights, Wyominghistory.org (last accessed Nov. 11, 2022), https://www.wyohistory.org/encyclopedia/topics/womens-suffrage-and-womens-rights.
2 Nellie Tayloe Ross, First Woman Governor In The United States, Wyominghistoryday.org (last accessed Nov. 11, 2022), https://www.wyominghistoryday.org/theme-topics/nellie-tayloe-ross-first-woman-governor-united-states.
3 Susan Pace Hamill, The Story of LLCs: Combining the Best Features of a Flawed Business Tax Structure (last accessed Nov. 11, 2022), https://www.law.ua.edu/misc/hamill/Chapter%2010–Business%20Tax%20Stories%20(Foundation).pdf.
4 Caitlyn Long, What Do Wyoming’s 13 New Blockchain Laws Mean?, Forbes (March 4, 2019, 7:29 AM), https://www.forbes.com/sites/caitlinlong/2019/03/04/what-do-wyomings-new-blockchain-laws-mean/?utm_source=twitter_video&utm_medium=social&utm_campaign=forbes&sh=2c5b24ad5fde.
5 Id.
6 Elena Botella, Wyoming Wants to Be the Crypto Capital of the U.S. (Jun. 18, 2021, 8:30 AM), https://slate.com/technology/2021/06/wyoming-cryptocurrency-laws.html.
7 Why Wyoming Will Become the New Blockchain Mecca, CorporateDirect.com (last accessed Nov. 11, 2022), https://corporatedirect.com/c-corps-s-corps/wyoming-blockchain-mecca/
8 See WYO. STAT. ANN. § 40-22 (West 2021).
9 Matthew T. McClintock, Understanding Wyoming’s 2018 Blockchain Laws A Model for Industry Regulation, 41 Wyo. Law. 40 (June 2018).
10 Wyo. Stat. Ann. § 40-22-104 (West 2021).
11 Daniele Pozzi, ICO Market 2018 vs 2017: Trends, Capitalization, Localization, Industries, Success Rate, Cointelegraph (Jan. 5, 2019), https://cointelegraph.com/news/ico-market-2018-vs-2017-trends-capitalization-localization-industries-success-rate.
12 Rpt. of Investigation Pursuant to Sec. 21(a) of the Securities Exch. Act of 1934: The Dao, Release No. 81207 (S.E.C. Release No. July 25, 2017)
13 HB0070: Open blockchain tokens-exemptions, Wyoming State Legislature, available at https://wyoleg.gov/Legislation/2018/HB0070.
14 HB0101: Electronic corporate records, Wyoming State Legislature, available at https://wyoleg.gov/Legislation/2018/HB0101.
15 Randolph A. Kahn, Why Blockchain Is More Important to Lawyers Than They Probably Understand, American Bar Association (January 16, 2018), https://www.americanbar.org/groups/business_law/publications/blt/2018/01/blockchain/.
16HB0126: Electronic corporate records, Wyoming State Legislature, available at https://wyoleg.gov/Legislation/2018/HB0126.
17 SF0111 – Property taxation-digital currencies, Wyoming State Legislature, available at https://www.wyoleg.gov/Legislation/2018/SF0111.
18 Hannah Foltz, Crypto-Friendly States: Which Are Best for Your Taxes? TokenTax (Aug. 16, 2022), https://tokentax.co/blog/crypto-friendly-states.
19 HB 0074: Special purpose depository institutions, Wyoming State Legislature, available at https://wyoleg.gov/Legislation/2018/HB0074.
20 Kraken Wins Bank Charter Approval, KrakenFX.com (Sep. 16, 2020), https://blog.kraken.com/post/6241/kraken-wyoming-first-digital-asset-bank/.
21 HB 0070: Commercial Filing System, Wyoming State Legislature, available at https://wyoleg.gov/Legislation/2018/HB0070.
22 SF0125 – Digital assets-existing law, Wyoming State Legislature, available at https://www.wyoleg.gov/Legislation/2018/SF0125
23 Wyoming Decentralized Autonomous Organization Supplement, SF0038, 66th Leg., Gen. Sess. (2021). The bill creates Wyoming statutes W.S. 17‑31‑101 through 17‑31‑116
24 Practical Law Finance, Wyoming Passes DAO Supplement Recognizing Decentralized Autonomous Organizations (DAOs) as LLCs, Thomson Reuters Practical Law (March 9, 2022), W-032-5565.
