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Lummis Introduces Bill For Cryptocurrency-Friendly Regulation

in News/Cynthia Lummis
Photo by Marco Bello/Getty Images

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On Tuesday, U.S. Sen Cynthia Lummis introduced bipartisan cryptocurrency legislation that she believes may revolutionize the way these assets are regulated in America. 

The Responsible Financial Innovation Act creates a more complete regulatory framework for digital assets and their oversight. By providing definitions to terms and clarifying which digital assets are securities and commodities, the legislation aims to provide better protection for both crypto companies and consumers, Lummis said in a press release. The bill also addresses federal jurisdiction, business requirements, and the treatment of digital assets for tax purposes.

Since digital tokens were first created more than a decade ago, these assets have grown into a $1.2 trillion industry. Proponents of the currency say it leads to innovation and economic growth and democratizes financial markets. Detractors say it is woefully under regulated and point to numerous instances where fraud has been committed. 

“As with any new technology, there are real risks to consumers, businesses, national security, and our financial system,” wrote Sen. Kirsten Gillibrand (D-N.Y.) in a Monday op-ed for Medium. Gillibrand co-sponsored the legislation with Lummis. “These risks make sound regulation key. Furthermore, without a clear and defined regulatory framework to guide their businesses practices, digital asset companies could be compelled to take their operations overseas.”

Gillibrand serves on the Agriculture Committee, which oversees the Commodity Futures Trading Commission (CFTC), and Lummis serves on the Banking Committee, which oversees the U.S. Securities and Exchange Commission. The bill will assign regulatory authority over digital asset spot markets to the CFTC. The CFTC already regulates the two most popular cryptocurrencies – Bitcoin and Ethereum – but the bill gives it much wider power and oversight.

The bill is in some ways may be a favorable compromise for the crypto industry.  By giving primary oversight of crypto to the much smaller CFTC, the bill shields the industry from SEC Chair Gary Gensler and his agency. Gensler has stated that most digital assets should be treated as securities. A joint press release issued by the senators refuted this point, claiming “most digital assets are much more similar to commodities than securities.” 

Many leaders in the cryptocurrency market have praised the bill. The Lummis and Gillibrand teams are still working with industry members to see how the bill can and should be improved. 

Sheila Warren, chief executive of the Crypto Council for Innovation, collaborated with Lummis and Gillibrand in crafting the legislation and called the bill a “significant step forward.”

“The crypto industry has been asking – pleading – for reg clarity to help users distinguish legit opps from scams,” she said in a June 3 Twitter post. “Instead, we’ve gotten ignored submissions, enforcement actions v. legit actors, and silence. We stand ready to collaborate to ensure safe, inclusive growth for all.”

Todd Phillips, director of financial regulation and corporate governance at the left-leaning think tank Center for American Progress, spoke out against the bill on Twitter on Tuesday.

“It is a big improvement over Lummis’s original bill but is still highly problematic,” he said. “My take: The status quo is better than this bill and it’s not a compromise I’d accept.”

Phillips said the final bill is littered with tax and security law loopholes and creates certain risks for consumers, giving an advantage to crypto over existing financial services, harming investors.

Crypto Queen

Over the past five years, Lummis has been one of the most vocal supporters of crypto at the national level.  

According to the joint press release, the bill “is the most substantial and comprehensive bipartisan effort to provide certainty and clarity to the growing digital asset and blockchain industries.”

“It is critical to integrate digital assets into existing law and to harness the efficiency and transparency of this asset class while addressing risk,” Lummis said in the press release.

The Responsible Financial Innovation Act has been many months in the making, with a draft bill surfacing last year, said Tyler Lindholm, State Policy Director for Lummis. 

Lindholm said Lummis was first introduced to cryptocurrency by her son-in-law Will Cole in 2013, who currently works in the crypto industry. She kept her eye on the industry and about five years later started pushing for Wyoming to offer friendly laws for the industry. 

It was also around that time Lindholm was a representative in the Wyoming Legislature, helping pass laws accelerating Wyoming’s place on the international stage as a cryptocurrency and blockchain leader.  One bill exempted certain developers and businesses from securities and money transmission laws. Another offered a charter for banks that deal mainly in digital assets. 

When Lummis announced her campaign staff in 2020, she brought on Lindholm, already known as a leader with the Wyoming crypto movement and dubbed the ‘Crypto Cowboy.’

Lindhold said Wyoming has some of the most crypto-friendly laws in the country. The Cowboy State recently attracted Kraken, the second-largest crypto exchange in the U.S., to the state. Federal Reserve Chairman Jerome Powell has denied Kraken and Wyoming’s other upstart crypto banks accounts through the central bank. 

Lindholm said the bipartisan nature of Lummis’ bill should give hope that Republicans and Democrats can still come together to get things done in Washington, D.C.

“The senators wanted to ensure the legislation was bipartisan and did work across the aisle,” Lindholm said. “It’s the first piece at the federal level anybody had done. They wanted to ensure it did not become a partisan issue.”

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State Rep Disappointed Gordon Vetoed Bill That Would Have Allowed Wyo To Issue Virtual Currency

in News/Legislature/cryptocurrency

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By Ellen Fike, Cowboy State Daily

Gov. Mark Gordon’s veto of a bill that would have allowed Wyoming to issue its own virtual currency is being welcomed by state Treasurer Curt Meier, but met with disappointment by one of the bill’s co-sponsors.

On Friday, Gordon vetoed Senate File 106, which would have allowed the state to create and sell Wyoming “stable tokens.” The stable tokens would have a fixed value and would be backed by the state’s assets so they would not see the value fluctuations of other virtual currency.

In a letter to Secretary of State Ed Buchanan, Gordon said that he was vetoing the bill for a couple of reasons, primarily that Wyoming Treasurer Curt Meier’s office is already struggling to keep up with its current obligations and the new law would add more burden.

“I believe there are good ideas contained in this act, but I am concerned that not all stakeholders were consulted prior to its passage by the Legislature,” Gordon wrote. “Wyoming’s reputation is at stake, as are the reputations of the individuals tasked with implementing this act, should the effort fail.”

Gordon recommended the Legislature take up the topic as an interim study.

Treasurer OK With Veto

Meier told Cowboy State Daily on Monday that while he believed his office could have established the stable token by the end of the year, the key to having a successful stable token launch was in the marketing.

“You must create demand and demonstrate something that makes your particular token unique in an area that is already full of competitors,” he said. “There is potential for establishing a successful launch of a stable token, but I concur with the Governor that we need to study the issue further.”

Nor is the office’s chief investment officer an expert on digital assets, Meier said, and the time needed for him to prepare for the launch of a digital currency wold have been siginficant.

“SF106 would have taken a lot of his time and attention as part of this launch,” he said. “In this unstable market, our CIO needs to concentrate on what he is supposed to do – manage and build our portfolio. I thank the Governor for giving us our CIO back and allowing him to do the job he was hired to do.

Olsen ‘Sorely Disappointed’

But bill co-sponsor Rep. Jared Olsen, R-Cheyenne, told Cowboy State Daily on Monday that he was “sorely disappointed” Gordon vetoed the bill, as it passed both the Wyoming House and Senate with more than two-thirds majorities in each chamber.

“In terms of this bill being vetted, on the House side, I sat through four House Appropriations meetings [about the legislation],” Olsen told Cowboy State Daily. “In my time in the Legislature, it is very rare that a bill take two committee meetings, let alone four. So the fact that it took four committee meetings told me that one of our most senior and experienced committees was taking its time vetting this issue.”

Olsen said that since there were four meetings about the bill during the session, there was plenty of opportunity for stakeholders to weigh in on the bill.

While Olsen did not disagree with Gordon’s assessment about the treasurer’s office, he did not think this meant Wyoming should stop moving forward. However, he had no intention of picking the legislation up as a potential interim study topic.

“We had the opportunity to be the first in the world with something like this, and I am 99% certain we have missed the boat, and you don’t get another bite at an apple like this,” he said.

Bill sponsor Sen. Chris Rothfuss, D-Laramie, did not return Cowboy State Daily’s request for comment on Monday.

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Wyoming Not Likely To Follow Colorado Yet In Accepting Crypto For Tax Payments

in News/cryptocurrency

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By Ellen Fike, Cowboy State Daily

Despite Wyoming’s status as a pioneer state when it comes to cryptocurrency, one expert does not believe that the state will be accepting digital money as payment for taxes as Colorado has decided to do.

Earlier this month, Colorado Gov. Jared Polis signed a bill which will take effect this summer that would allow Colorado residents to pay their income taxes and other government fees with cryptocurrency. Polis said that Colorado’s finances are all based on dollars, so any payments made with crypto would be converted back into dollars by an intermediary source.

Wyoming crypto expert Caitlin Long told Cowboy State Daily on Wednesday that the Wyoming Legislature dismissed the idea of using crypto for tax payments, since Wyoming does not have a state income tax.

“The amounts involved were far smaller than those in states with big income taxes or other types of taxes, like gross receipts or franchise taxes on businesses,” Long said. “The University of Wyoming has been accepting donations on crypto since 2018 and could work with the state to show how easy it is to set up.”

Cryptocurrency is a digital currency exchanged through a computer network that is not reliant on the government or a bank to uphold or maintain it.

During the most recent legislative session, Wyoming lawmakers passed a bill that would allow Wyoming’s treasurer to issue “stable tokens,” a form of digital currency backed by solid assets. Senate File 106 cleared both chambers of the Legislature and is awaiting the signature of Gov. Mark Gordon to become law.

If Gordon signs the bill into law, Wyoming would be the only state in the nation with its own digital currency.

Rep. Mike Yin, D-Jackson, said during the session that the values of most digital currencies can be very volatile, while Wyoming’s stable tokens, being backed by the state’s assets, would remain constant in their value.

Stable tokens allow people to trade in the digital realm without experiencing rapid fluctuations in the value of their currency, he said.

Wyoming is also home to the world’s first two digital banks, Kraken and Avanti, the latter of which was founded by Long.

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Hamster Outperforms Warren Buffet in Cryptocurrency Stock Market

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By Ellen Fike, Cowboy State Daily

A Wyoming cryptocurrency expert wasn’t too surprised to learn that a crypto-trading hamster is outperforming billionaire Warren Buffet when it comes to the stock market.

Basically, everything crypto-related is doing well right now, according to Wyoming crypto expert Caitlin Long.

Mr. Goxx, a hamster who helps his owner choose whether to buy or sell certain cryptocurrencies, has been outperforming Bitcoin, the NASDAQ 100, Buffet-owned Berkshire Hathaway and the S&P 500, according to NPR. His portfolio is up nearly 20% since the hamster (and his human) began trading in June.

Long, the founder of a financial company focusing on digital assets, told Cowboy State Daily on Monday that the hamster isn’t really a master of cryptocurrency. Instead, the market is just good right now.

“Crypto markets tend to be characterized by high correlation (in other words, the entire sector goes up or down generally together), and we’re in a crypto bull market right now,” Long said. “So I’m not surprised the hamster has outperformed Buffett & the stock market. Pretty much everything in crypto has done so as well.”

The hamster runs on a wheel that allows him to select from dozens of cryptocurrencies. Then, deciding between two tunnels, he will choose whether to buy or sell. Then, his decision is sent over to a real trading platform, according to NPR.

The hamster’s owner has remained anonymous since creating a Twitch social media account to show videos of Mr. Goxx trading.

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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

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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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