Proposed US legislation in the state of Wyoming aimed at defining what digital assets are could hold lessons for regional and national regulators.
The UK’s Financial Conduct Authority (FCA) has declined to comment on the innovatory new law, designated the Digital Assets-Existing Law Bill, introduced by the US state of Wyoming on January 18.
The bill covers the classification and legal status of crypto-assets, and will go into effect on March 1. Instead, the FCA, points inquiries towards its most recent pronouncements on the topic – most notably the hefty 58-page report released by its crypto asset taskforce at the end of October – for those seeking clarity on its views.
Reluctance to offer opinion is not surprising: it wouldn’t be proper for the FCA to express an opinion about decisions taken by an overseas legislature. Moreover, there is very little similarity between the financial governance required by Wyoming and that required by the UK.
The innovatory regulation introduced by Wyoming might be seen as a land grab for a share of the crypto-asset business by a vast and sparsely populated state which needs jobs and investment. It is not a major financial centre in which a reputation for careful and prudent regulation is of paramount importance, so a bit of a gamble by the state government perhaps carries minimum downside risk.
But there’s more to it than that. Even though crypto prices are in the doldrums, elected representatives and regulators across the world are starting to get to grips with the new legal frontiers introduced by the asset class – and this process is ultimately probably more important than where the price of bitcoin stands on any given day.
YOU’RE SO MONEY
The Wyoming bill offers three different classifications of crypto- assets: as digital securities, digital consumer assets and virtual currencies. All three have been defined as “intangible personal property”, which, significantly, bestows upon crypto currencies the same treatment that money receives from regulators and courts – a status that many more mainstream regulators has so far eschewed.
Regulators in Mexico and Denmark, for example, treat crypto as an unregulated asset, while the UK’s tax authority, the HMRC, was quite clear in its guidance unveiled last month that it would treat crypto as a security and not money.
The new bill means crypto currencies will be subject to the same laws and restrictions as fiat money, but what is perhaps more significant is that the bill will give greater legal certainty to crypto-assets. At the moment, in any case of litigation or bankruptcy anywhere in the world, no-one is quite sure how a court will classify crypto currencies.
The bill addresses exactly this point. It is, it reads: “an Act relating to property; classifying digital assets within existing laws; specifying that digital assets are property within the Uniform Commercial Code.” This is a big step, and could bring crypto businesses flocking to Wyoming.
The western state is not the only authority to have sought to make itself a crypto hub by introducing regulation that gives crypto-assets legitimacy, but it is in the forefront of these developments. In March 2018, the state legislature introduced five bills in the space of as many weeks. One of these, Bill 70, made Wyoming the first government anywhere in the world to define crypto currencies as an entirely new asset class, distinct from a security or commodity.
When the history of crypto is written, the state of Wyoming might well earned the right to have a chapter all to itself.