Wyoming may be the least populous state in the U.S… but it could soon become the world’s new “Crypto Valley”.
Crypto entrepreneurs have come running to the state, thanks to regulation Wyoming passed in March 2018. Those changes made it easier to start crypto-related limited liability corporations (“LLCs”). Now, as many as three new crypto-related LLCs are launching in Wyoming every day.
But that was just the beginning. Wyoming recently passed a new bill that classifies crypto as money.
And it could impact the future of crypto for decades to come…
Wyoming, with less than 0.2% of the U.S. population, certainly isn’t creating rules that the rest of the country is obliged to follow.
But other states – and eventually the U.S. federal government – could follow its lead if its policies lead to financial success.
You see, the federal government, its agencies, and U.S. states can’t agree on how to handle cryptos.
Right now, four different authorities in the U.S. see cryptos different ways…
The U.S. Securities and Exchange Commission (“SEC”), which oversees securities markets, considers virtually all of the more than 2,000 cryptos on the market to be securities. It makes exceptions for the widespread bitcoin and Ethereum, though – which means more than half the market is not covered by the SEC.
Another U.S. regulator, the Commodities Futures Trading Commission (“CFTC”), controls commodity futures and derivatives transactions. It has labeled cryptos as commodities – and claims the power to regulate the industry.
Yet another regulator, the Financial Crimes Enforcement Network (“FinCen”), sets Know Your Customer (“KYC”) and Anti-Money Laundering rules in the U.S. It considers cryptos and tokens a form of money. So it requires crypto companies to register with the government, collect KYC documentation on their customers, and report any suspicious financial transactions they encounter.
Lastly, the Internal Revenue Service (“IRS”), which collects taxes, has determined that cryptos are properties, not currencies. That means every time a U.S. citizen sells cryptos for a profit, he or she must pay capital gains tax on the transaction.
Put it all together, and you have four different U.S. government bodies that consider cryptos four different things – creating a tangle of regulations.
You can see why Wyoming’s decision has the potential to break new ground.
Other U.S. states are regulating cryptocurrencies in their own ways. Wyoming’s pro-crypto policies have attracted a wave of crypto investments… while New York’s cumbersome regulation, for example, is doing the opposite.
New York began setting rules for the crypto industry before most other states had even heard of bitcoin. Its controversial “Bitlicense” – which is a business license for virtual currency activities – went into effect in August 2015.
The licensure process has cost some companies more than $100,000 in fees and legal work, and it can take three years or longer for a company to gain approval. The result? Fewer than 20 companies have gotten a Bitlicense, and several high-profile crypto companies simply choose not to do business in New York.
The U.S. regulatory landscape is a microcosm of what we’re seeing around the world. Some countries have created crypto-friendly legislation, while others have chosen to over-regulate the industry – slowing the rise of crypto industries in those countries.
For example, in 2013, China first created rules around bitcoin and blockchain (the technology behind bitcoin). Today, it has a pro-blockchain/anti-crypto stance.
But as the Chinese say, you can’t have both the fish and the bear’s paw.
China’s back-and-forth stance has created a lot of confusion and contradictions when it comes to cryptocurrencies, specifically bitcoin. While citizens can own them, they can’t exchange cryptos for real money. That means they can operate crypto miners – the powerful computers that secure the bitcoin network in exchange for a reward – but they can’t swap those rewards for fiat money.
In response, big Chinese crypto mining companies have simply moved offshore.
Meanwhile, Japan was one of the first countries to legally recognize bitcoin as a means of payment. That has helped it become one of the world’s largest crypto markets.
Despite licensure requirements, Japan’s annual crypto transactions are now approaching $100 billion a year. More than 3.5 million citizens trade cryptocurrencies there.
In short, crypto regulation can attract new investment or drive it away. By defining cryptos as money, Wyoming is looking to regulate in a way that fosters growth.
The state’s rush of new economic activity has gotten the attention of lawmakers across the U.S. This should force U.S. regulators to take a hard look at the results of over-regulation – and encourage them to follow Wyoming’s lead.
It’s only a matter of time. And as the regulatory landscape stabilizes, U.S. crypto investors will see fantastic profits in the years ahead.
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Source: Daily Wealth