Wyoming still wants to attract new crypto companies

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Caitlin Long first got into crypto about a decade ago, but she really saw its potential after trying to donate bitcoin to her alma mater, the University of Wyoming.

What did they say? And I said, OK, let me tell you what it is, and let’s see if we can figure out how to make it work, Long said.

Now Long is CEO of Custodia Bank, headquartered in Cheyenne. It is trying to become a member of the Federal Reserve to manage digital assets and has a charter from the state of Wyoming.

Over the past few years, Long has helped make Wyoming one of the most crypto-friendly states in the country. She calls the technology an incredible opportunity, but says she understands why some people have reservations about digital assets, especially in light of the recent high-profile collapses of several crypto companies like FTX.

It’s been a constant drumbeat I’ve had for five years publicly trying to warn people that these businesses are going to fail, Long said. This goes beyond high leverage business models. There were pure criminals in this industry.

However, Long said crypto has helped his state diversify its economy beyond the energy industry. Wyoming lawmakers have passed at least 20 laws in an attempt to attract new crypto businesses. This year, they allowed the state to issue its own cryptocurrency in the form of a stablecoin.

At the federal level, junior Wyomings senator Cynthia Lummis has been dubbed “the queen of crypto” because she’s so bullish on technology. She recently introduced a bill that would allow the federal government to regulate crypto like other assets in finance and points to Wyoming as an example of responsible policy.

I believe Wyoming has a legislative framework that, if used by FTX and other companies, would have prevented some of the fraud we’ve seen, Lummis said on a recent press call.

But some wonder whether lawmakers should focus on crypto. Christopher Odinet, a law professor at the University of Iowa, said most digital assets aren’t tied to anything tangible, like commercial goods or supply chains.

I think you have to ask yourself, what is it really for? he said.

One question he has is whether crypto should be part of banking. Wyoming is the first state to grant banks the ability to host digital currencies alongside government-backed fiat currencies under one roof. It’s called a Special Purpose Depository Institution, or SPDI, and most importantly, these crypto assets are backed by cash reserves.

However, Odinet said it may still not be a good idea for the Federal Reserve to get involved in SPDIs.

If the 2008 financial crisis taught us anything, it’s that simplicity in banking is truly a pillar in avoiding financial damage and the contagion that can ensue, he said.

Earlier this year, the Federal Reserve Board rejected Long’s Custodia bank’s request, arguing that the companies’ focus on crypto posed too many security risks. Custodia has filed a lawsuit challenging the council’s handling of this request.

In the meantime, Wyoming continues to invest in the future of crypto in the state. The University of Wyoming has created a center for blockchain and digital innovation. The center hosts an annual event, called the Wyoming Blockchain Stampede, which attempts to encourage young local professionals to get involved with digital assets.

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