Beware Delawarification: Is Wyoming Treading the Right Path?
January 24, 2019 by Paul de Havilland
Wyoming has made crypto headlines recently as a result of its apparently sudden “crypto-friendly” status. On January 16th the state House of Representatives presented a bill that would allow companies to issue tokenized stock certificates. But before anyone gets too excited, a dose of reality is in order.
Also read: Lightning Network Goes to Congress as Specter of Crypto Policy Grows
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Wyoming’s Game Changer Bill… But What’s the Sport?
The bill, HB0185, is a mere six pages long and is little more than a modernization of the traditional issuance of stock certificates. If passed, it will go into effect on July 1st, and offer corporations and investors more nimbleness by, as Gabriel Shapiro from DLx Law LLP puts it, making it “easier for companies and investors to start harnessing the power of public blockchains for traditional stock ownership.”
Shapiro also calls the bill a “game changer”, but it’s not exactly obvious which game he is referring to and what changes it would make that the digitization of many traditionally paper-based processes hasn’t already achieved.
The Cheney State Has Trodden This Path Before
In a bill-passing spree earlier last year, the state passed a number of potentially significant crypto and token-friendly laws. House Bill 70, exempting “utility tokens” from Wyoming’s securities regulations, was passed on March 6th.
House Bill 19, passed four days prior, effectively opened the doors to cryptocurrency exchanges; House Bill 101 permitted corporations to store records on blockchains; Senate Bill 111 exempted cryptocurrencies from state property taxes; and House Bill 126 allowed for the creation of so-called “Series LLCs”, “authorizing limited liability companies to establish series of members, managers, transferable interests or assets as specified”.
It also recently introduced Senate Bill SF0125, which would help the state create a digital asset custody and lending infrastructure that would be the envy of any other state in the U.S.
Hold Your Horses, Wyoming… Clayton Might Have Something to (Not) Say About This
Bills 101 and 185 do little more than modernize equities markets and corporate records in line with a digital revolution that began with the dot com boom. It must also be remembered that Wyoming and Hawaii had been so hostile to crypto that Coinbase withdrew from the state, before returning mid-last year.
And while Wyoming’s crypto-embrace is Maltese in intent, the state is not Maltese in nature. Digital assets remain subject to IRS laws, which allow the federal government to tax crypto assets as property. Utility tokens are defined by the U.S. Securities and Exchange Commission as “securities”, even if that definition is created by a lack of definition.
So despite some corporation-friendly developments that act as a form of delawarification for blockchain technology, as Jack Tatar, managing partner of Doyle Capital and author of the Forbes crypto newsletter says, what investors actually need is “federal regulatory clarity [on how to] effectively raise funds and target an exit strategy.”
Have your say. Will Wyoming set a standard for other states to follow or find itself on the wrong end of a federal backlash?
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