There is no arguing the fact that crypto regulations will be a big boost for the industry. It is a sign that the government finally recognizes cryptocurrencies, and companies will be more inclined to make plays with the assets.
For as long as the crypto industry has become mainstream, top players have sought regulation and recognition from the government. It has been a case of everyone wanting to finally be on the same level playing field as the traditional financial space. Still, different administrations have so far failed to bring the desired regulation level.
Now, with cryptocurrencies getting more popular, it appears that different states are leaving Washington D.C. behind and pursuing state-wide laws on their own.
Wyoming Grows Strong
Currently, Wyoming is getting praise for being the most crypto-friendly state in the country. The state caused a significant stir in 2019 when its legislative arm authorized Special Purpose Depository Institutions (SPDIs) to receive deposits and custody assets. These assets include cryptocurrencies.
At the time, the Wyoming Banking Division acknowledged that most SPDIs would primarily focus on cryptocurrencies and digital assets. While they can also deal with traditional assets, they can’t make loans like conventional banks.
Soon after the charter was authorized, Kraken Bank was the first business to get a charter. The bank’s charter was followed by Avanti Bank and Trust, which came in September 2020. At a February event of the Chamber of Digital Commerce, Cynthia Lummis, a Senator from the state, confirmed that there are several other SPDIs in the pipeline for Wyoming.
Lummis herself is a crypto-friendly senator who has worked hard to provide effective regulation for digital assets. She currently heads a Digital Innovation Caucus, hoping it will help provide clearer crypto education for her fellow members on Capitol Hill.
New York Evolves
New York is another state that has been doing a lot of work to make it easier for crypto firms to incorporate within its borders. The state has been handing out its Virtual Currency License - also known as BitLicense - for years now. Any company looking to operate within its borders will need to have this license or face significant government scrutiny.
However, many crypto firms hit out at the government for making it difficult to get the BitLicense in the first place. In response, the New York Department of Financial Services (NYDFS) published a request form asking for comments on a new approach to create a better way of getting a license. As the firm explained, companies can get “conditional BitLicenses” that would allow them to collaborate with existing license holders. Applicants will send a proposal to the NYDFS containing a draft of a service-level agreement with a current license holder. From there, they will work with the NYDFS in a supervisory relationship and get a conditional license.
The approach appears to have yielded some results. Several companies have approached the NYDFS for licenses, and even Bakkt has gotten its application approved. There is every reason to believe that New York - the world’s financial capital - will do more to create an inclusive environment for crypto firms.
Crypto insiders are also keeping their eyes peeled for developments in Florida. Earlier this year, Miami Mayor Francis Suarez told Forbes that his city is looking into the crypto policies of states like Wyoming and New York with a view of creating the most crypto-friendly regulations in the United States.
The Mayor has also proposed innovations like paying city workers’ wages in Bitcoin and using part of its treasury to make Bitcoin investments. As he explained, it is time for Maimi to get on the bleeding edge of financial development and grow from there. By allowing innovations such as paying salaries in Bitcoin, the city could make cryptocurrencies more available and open to the public, thus creating a more equitable environment for companies and investors to come in.
Miami has now voted to look into Suarez’s proposal. Success with this could spread to other parts of Florida, and the state could be well on its way to greater crypto friendliness.
Lummis has applauded Surez’s initiatives. At the Chamber of Digital Commerce panel, she welcomed him to examine Wyoming’s legislative framework and build on it to develop Bitcoin and crypto regulations.
Hope for Washington Nonetheless
As always, the dream for crypto regulation is still alive. Everyone hopes that the Biden administration will be more accepting of cryptocurrencies, although there have been mixed signs so far.
Despite the mixed signs, insiders believe that some progress could still be made. Earlier this month, Jay Clayton, the former Chairman of the Securities and Exchange Commission, explained that regulations are coming soon. Speaking with CNBC, Clayton said:
“Where digital assets land at the end of the day […] will be driven in part by regulation—both domestic and international—and I expect, and I’m speaking as a citizen now, that regulation will come in this area both directly and indirectly whether it’s through how these are held at banks, security accounts, taxation and the like. We will see this regulatory environment evolve.”
Tyler Winklevoss, the co-founder of the Gemini Foundation, has also declared that the prospects of a Bitcoin ban in the United States are dead. Speaking on the What Bitcoin Did podcast, Winklevoss said:
“I think that the U.S. will never outlaw Bitcoin. There’s too much precedent that’s been set in the courts. The Coinflip order, which was a CFTC [Commodity Futures Trading Commission] enforcement action which was upheld in the courts, considered Bitcoin a commodity like gold.”
Time will tell how Washington reacts to the crypto phenomenon. However, if it doesn’t sit up, states could very well embark on their regulatory regimes.