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Wyoming New Blockchain and Digital Asset Ligistation

States have long been "democracy laboratories" where politicians can experiment with certain innovative policies at local or regional level that could eventually become national programs. On the technical side, some states have tried to establish themselves as blockchain laboratories. For example, Vermont announced last week that it will work with sellers to launch a pilot program that allows new captive insurance companies to register with the Vermont Secretary of State using blockchain.

Throughout the country, Wyoming has been particularly active in this sector and, according to reports, wants to be a "Delaware of the West" in favor of businesses [subscription required] as well as a haven for blockchain and fintech activities. To this end, the Wyoming legislator has promoted several blockchain bills through the New Year Committee (following an active 2018, which saw the state pass a number of regulatory measures related to blockchain and digital resources).

Three draft laws that have passed through the commission and will be taken into consideration by the whole Wyoming House:

  • HB57, which would create a supervised, flexible and regulated fintech sandbox to test new products and services. According to the bill, "a person who places an innovative financial product or service at the disposal of consumers in the financial technology sandbox can obtain an exception to the requirements specified by the law or the standard … if these statutes or standards do not currently allow the product or service being made available to consumers. "Under HB57, companies would be required to submit an application for admission to the fintech sandbox of the state, and will be subject to certain provisions on consumer protection and transparency during their term of office.
  • HB70, which would authorize the implementation of a blockchain-based commercial filing system for documents to be filed with the Secretary of State under certain provisions of the Wyoming Act. Unless replaced by the subsequent legislation, the blockchain-based commercial storage system would be required to operate in parallel with the existing Wyoming system.
  • HB62, which would establish that "open block tokens" with certain "consumer" characteristics that were not traded to initial buyers as a financial investment (together with "virtual currency") intangible personal property – and not securities – under the law of the state of Wyoming. According to the bill, "consumer" is defined as "a circumstance when a token is exchangeable or provided for the receipt of real or tangible services, content or personal property, including rights to access services, content or personal data or tangible properties. "HB62 would have repealed the Wyoming law passed in 2018 which established an exemption for some" open token blockchains "under the state securities laws. According to the legislative results established in HB62, these open blockchain tokens (as defined in the HB62 and 2018 law) are not securities as a person who is sold can not receive a cash payment or a share of profits from a developer, but instead receive a fixed amount of, or access rights to, consumer goods or services; and, as they are not securities, it is not necessary to specifically exempt offers or sales of such tokens from the laws on government securities. While the question of whether token sales are securities transactions subject to regulation under federal securities laws is a factual investigation and is not fully resolved, HB62 crops out a subset of token sales from being classified as such in the Wyoming state law.

Beyond these laws, the Wyoming legislature is considering other blockchain-related invoices, including HB74 (which would allow the creation of specialized deposit banks that might be better suited to manage high and unique identification risks. of the customer, money laundering and beneficial ownership requirements placed by companies using blockchain or trading of digital assets) and HB185 (which would allow Wyoming companies to issue "certified tokens" instead of share certificates). Finally, last Friday, the legislature of Wyoming introduced SF125, a radical law that, among other things, would facilitate the qualified custody of digital resources and specify a taxonomy of digital resources and their treatment under the Uniform Commercial Code.

Blockchain companies, as well as regulators, policy makers and legal operators, would do well to keep the legal framework for blockchain and rapidly developing digital assets in the Wyoming legislative lab.

© 2019 Proskauer Rose LLP.

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