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Caitlin Long

Avanti Becomes Second Digital Bank Approved In Wyoming

in News/banking/cryptocurrency
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By Jim Angell, Cowboy State Daily

The nation’s second bank dedicated to handling digital assets and easing transactions between digital assets and the American dollar has won approval to operate in Wyoming.

The Wyoming Banking Board voted 8-0 on Wednesday to approve the charter of the Avanti Bank & Trust, the company announced.

Avanti is the nation’s second digital asset bank to win approval to open in Wyoming. Kraken Financial won charter recognition from both state and federal regulators in September.

Like Kraken, Avanti will have the same powers as a national bank in its approved business lines and will provide several services, including dealing in its own product known as “Avit” to ease the exchange between digital currencies — such as Bitcoin — and dollars.

The bank’s primary job will be to serve as a bridge between digital asset systems and systems that rely on traditional U.S. dollars, said Caitlin Long, Avanti’s founder.

Long, a Wyoming native, was deeply involved in legislative efforts that led to Wyoming becoming the first state in the nation to develop rules to regulate “Blockchain” technology, a digital ledger system.

Her work led in 2019 to legislative approval of a bill allowing the creation of “Special Purpose Depository Institutions” for the handling of cryptocurrency transactions.

Wyoming’s work has made it the only state in the nation where banks working with both digital and traditional assets can operate, Long said in a prepared statement.

“Currently, the only type of U.S. financial institution that can provide final and simultaneous settlement of trades between digital assets and the U.S. dollar—because it is the only type currently approved to handle both within the same legal entity—is a Wyoming special purpose depository institution like Avanti,” she said. “Wyoming has the only U.S. regulator with a bank supervisory and regulatory program for digital assets that is near completion.”

Avanti’s approved products and services include the issuing of Avit and serving as a depository for for digital assets.

The company plans to begin opening commercial accounts in 2021 and will open other types of accounts with high minimum balance requirements soon after, Long said.

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Kraken: World’s First Digital Bank To Open in Wyoming

in News/Business
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Jim Angell, Cowboy State Daily

The world’s first bank dedicated to handling digital assets will open in Wyoming with state approval of an application to open a “Special Purpose Depository Institution.”

Kraken, a company that specializes in the purchase, sale and trade of digital currencies such as Bitcoin, won unanimous approval from the Wyoming State Banking Board on Wednesday to open a bank for the holding and trading of digital currencies.

The SPDI, to tentatively be called Kraken Financial, is the first of its kind to win bank charter recognition from both state and federal regulators, the company said in a news release.

The bank will be headquartered in Cheyenne and will provide comprehensive services for holders of digital assets, the company said, such as accepting deposits and allowing its customers to use their digital assets to pay bills, trade for other currencies or make investments.

Kraken described the bank as a bridge between “cryptocurrencies” and traditional economic systems.

In announcing the Banking Board’s approval, David Kinitsky, Kraken Financial’s CEO, praised Wyoming’s Legislature for making the changes to state banking laws needed to allow the handling of digital assets.

“We’re thrilled to work in a state so aligned with our philosophy and values,” he said. “Wyoming is a rare and shining example of how thoughtful regulation can drive innovation for (financial technology) companies.”

The company also said that Wyoming is the only place where such a bank could open and be successful.

“Though many regulators talk about fostering innovation, Wyoming is the only state to actually build out this vision in a concrete, commercially viable way,” its news release said.

The news was welcomed by legislators who worked to adjust Wyoming’s banking laws to allow such operations.

“Big news Wyoming!” Rep. Tyler Lindholm, R-Sundance, one of the legislators to work on the law, wrote on his Facebook page. “We just made history this morning. While I know this may seem a little geeky, it is huge news that Wyoming can and has expanded its economy and can now officially be considered a tech State.”

“And we’re off…. Wyoming people asked for economic diversity and THEY HAVE IT,” another advocate of the banking bill, Sen. Ogden Driskill, R-Devils Tower, wrote on his Facebook page. “The first of many tech jobs and dollars for the state.”

Caitlin Long, a Wyoming native recognized as an expert in cryptocurrency and “blockchain banking,” also expressed excitement over the approval in a post on her Facebook page.

“As a (Kraken) shareholder, I’m thrilled, but even more thrilled for Wyoming,” she wrote. “True economic diversification and a big building block for attracting a new tech and financial services industry here.”

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Wyoming’s Lead In Blockchain Tech Could Help Diversify Economy

in Economic development/News
Caitlin Long
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By Ike Fredregill, Cowboy State Daily

Blockchain banking could open new avenues for employment in the Cowboy State, but people should start learning about it as soon as possible, according to self-taught blockchain guru Caitlin Long.

“Blockchain isn’t rocket science, though certain aspects of it are being worked on by rocket scientists,” said Long, who recently announced she was founding a blockchain bank in Cheyenne. “The vast majority of users can be self-taught. There’s so much on the Internet (about blockchain). If you take the time, you can learn it.” 

A Wyoming native, Wall Street veteran and Wyoming Blockchain Task Force gubernatorial appointee, Long said she taught herself the ins and outs of blockchain.

“It doesn’t require a degree to learn this technology,” she added. “Just get your feet wet and start learning.” 

Blockchain is a digital ledger system stored across a variety of online networks and the underlying technology enables the use of cryptocurrencies such as Bitcoin. 

As the rest of the nation grapples with the rise of blockchain technologies in agriculture, banking and dozens of other industries, Wyoming was first to the front by passing legislation facilitating the creation of Special Purpose Depository Institutions (SPDI) (https://cowboystatedaily.com/2019/12/02/wyoming-opens-avenues-for-cryptobanking/), or “speedy banks” specializing in cryptocurrency transactions, in 2019. 

Taking advantage of the SPDI regulations, Long said her newest business venture, a digital asset financial institution dubbed Avanti, could open as soon as 2021.

“I will give (employment) preference to people in Wyoming,” she said. “The beauty of blockchain is we can hire people who live in Wyoming’s rural areas. As long as they have an internet connection, they can work as customer service representatives and compliance officers.”

Long said her company intends to file an SPDI application with the Wyoming Division of Banking soon.

Wyoming Banking Division General Counsel Chris Land confirmed the agency is currently reviewing two other SPDI applications.

In regards to digital asset education, the University of Wyoming is poised to take advantage of the state’s lead in the blockchain world, said Jim Caldwell, UW Computer Science Department head. 

“This is a huge opportunity for the state to diversify the economy,” Caldwell said. “Everyone knows about Wyoming and blockchain. There’s international attention on the state focusing on these efforts.” 

With the help of a state funding match, IOHK, a financial technology company, is in the process of backing a blockchain research and development lab at UW, Caldwell said.

“We’re going to be working on some cutting-edge blockchain research at UW,” he added.

While the Computer Sciences Department currently offers a class about the engineering side of building out blockchain, Caldwell said UW’s College of Business offers a class about blockchain in financial technology.

“The applications for blockchain are really broad and being used by nearly every discipline,” he said. “It has the potential to affect every discipline on campus in some way.” 

Avanti and other SPDI banks could help Wyoming jump into the global digital asset market, but Long said America has some catching up to do. 

“The U.S. is absolutely behind the curve on digital assets in general,” she explained. “In Switzerland, not only can banks offer custody services and trust services, but they can accept deposits in the form of digital assets. That goes quite a bit further than even the Wyoming SPDI bank charter does.” 

Hong Kong, Singapore and Japan are hubs for the digital asset industry, which is valued at about $300 billion annually, Long said.

“The U.S. is only about 20 percent of that value,” she added. “We have this logjam in our financial services regulations.”

By Wyoming statute, SPDI banks differ from traditional financial institutions. 

“SPDI banks cannot take risks with customers’ assets,” Long said. “The law requires the banks be 100 percent reserved, so the banks cannot lend or take interest rate risk. They are akin to the money warehouses of the 1800s.”

Because all the transactions are digital, Avanti will not have a typical brick-and-mortar branch with tellers and other amenities people might associate with traditional banking. As required by law, however, it will have a physical location in Cheyenne, Long explained.

“One of the services Avanti will provide is the ability to change digital currency into dollars,” she said. “Primarily, we will provide custody services for private keys that control digital assets.”  

Wyoming opens avenues for cryptobanking

in News
Bitcoin bank
2453

By Ike Fredregill, Cowboy State Daily

The Wyoming Division of Banking is working to finalize the first two applications for a new type of bank: Special Purpose Depository Institutions (SPDI) or “speedy banks,” which will specialize in transactions involving cryptocurrency.

Providing financial services for the modern age, SPDIs could facilitate transactions with cryptocurrency, such as Bitcoin, and access to cryptographic keys. 

Chris Land, general counsel for Wyoming’s Banking Division, said the agency is the chartering authority for the new banks, which were made possible by legislation earlier this year.

“Once an application is filed, the chartering process takes six to nine months, which is the same as any other bank,” Land wrote in an email, adding the first applicants filed in October. “During this time, we’ll review their applications closely and determine whether they have a proposal that meets our high standards and doesn’t present significant risks to the state or national financial system.”

Despite Wyoming typically trailing national trends, the state is paving the way for SPDIs, said Caitlin Long, a member of the Wyoming Blockchain Coalition.

“We’ve done this at least twice before — we did it 150 years ago when we gave women the right to vote,” Long said. “And Wyoming invented the Limited Liability Company in 1977, which is the most prominent form of business entity in the United States today.”

Other states are taking note. Colorado Gov. Jared Polis told Gov. Mark Gordon, “You guys are leading the way on blockchain, and I’m coming for you,” Gordon’s senior policy adviser Renny Mackay told the Wyoming Legislature’s Joint Committee on Minerals, Business and Economic Development.

Long said kudos are owed to the policy makers. 

“Other states are behind the curve, because they just haven’t had someone roll up their sleeves and do it,” she explained. “We really needed new economic ideas in Wyoming, and both Gov. Matt Mead and Gov. Gordon got behind this. Legislative leadership recognized this is an opportunity for us to truly lead, and hat’s off to them. They did it.”

Clarifying ownership

SPDI facilities most likely won’t resemble traditional banking institutions, Long said. 

“The average person won’t even know it’s a bank,” she said. “It’s really there to provide custody of access to the cryptographic keys.”

Unlike a typical digital password, private cryptographic keys are a type of password that can’t be changed used to lock or unlock cryptographic functions such as authentication, authorization and encryption. 

Sen. Chris Rothfuss, D-Laramie, said companies attempting to conduct their finances with cryptocurrencies encountered several obstacles in their day-to-day business operations, creating a need for the SPDIs. 

“We put together the legislative framework for SPDI banks based on concerns of federal regulations and statutes that were challenging for innovative companies to overcome,” Rothfuss explained. “They were dealing with these challenges when they were just trying to bank, things like make payroll for their employees.”

Although cryptocurrency has a negative reputation for being hard to track — thus, the currency of the criminal underworld — Long said the opposite was true.

“I came across cryptocurrency in 2012 when I was working on Wall Street,” she said. “When we put money in (a traditional) bank account, we technically are lending the bank that money, and they may or may not pay it back to us. I wanted to be able to own my assets outright.”

On the stock exchange, bookkeeping can be inaccurate as Dole Food Company shareholders discovered in 2015 when more than 4,500 shareholders submitted claims for nearly 50 million company shares, despite the fact only about 36 million existed. Cryptocurrency, on the other hand, allows people to accurately track their assets.

“With cryptocurrency, it’s very clear who owns the asset,” Long said. “If you control the private cryptographic key, which is what enables you to move the asset, then you own the asset.”

Land said law enforcement agencies are catching up to the technology and using cryptocurrency data to track down criminal organizations.

“As long you follow the data, you’ll be able to trace where the asset goes, and where it’s coming from with a higher degree of certainty than you would have with large amounts of cash,” he said. “There’s a lot of software products out there that specialize in bringing transparency to the digital asset markets.”

Bipartisan tech

As with most new technologies, cryptobanking has a potential for hiccups.

“There’s always a risk, because it’s innovation,” Land said. “I’m literally spending 90 percent of my time trying to mitigate those risks. In case one of the banks fail, we have policies and procedures and resources to ensure it doesn’t cost the state money.”

Making sure SPDIs don’t cost taxpayers money while providing a “net benefit” to the state is a top priority for the division, he added.

“We’re trying to control the known unknowns,” Land said.

Wyoming has more laws regulating blockchain, the technology behind cryptocurrency, than any other state in the nation, he said.

According to Rothfuss, Wyoming jumped to the head of the financial technology pack when Mead created the Blockchain Taskforce in 2018.

“This is an emergent field in financial technology that does not have a lot of robust governance structures around the country or world,” he said. “There were a lot of industry advocates trying to get some time with any government. They found a receptive ear in the blockchain task force and people flew in from all over the world.”

Despite growing divisions between political parties nationwide, Rothfuss said penning legislation for the growing sector has been a bipartisan effort.

“This is an area where we fortunately do have a tremendous amount of support from both sides of the aisle,” he said. “This is an area where everyone — regardless of party, regardless of branch — wants to see a path forward to success.”

Although the foundation was laid, but Rothfuss said Legislature has more work ahead.

“Much like with the LLC, you learn from experience, you amend the statutes to improve the functionality of that entity,” he explained.  “We’ll be doing much the same thing as time goes forward with SPDI banks.”

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