Blockchain's Regulatory Race Is Just Getting Started
Wyoming Leading the Charge in the US on Blockchain Regulation
The legislature of the state of Wyoming has been active with respect to regulating digital assets and blockchain innovation.
The Wyoming Utility Token Act
Bill 62 is entitled the Wyoming Utility Token Act, which covers those open blockchain tokens which are restricted to being exchangeable only for specified consumptive purposes and do NOT entitle a token holder to a cash payment or a share of profits from the technology developer or business that created the token. The bill explains that open blockchain tokens with such consumptive purposes are like loyalty programs.
Furthermore, these consumptive blockchain tokens do NOT constitute securities because a person who is sold a consumptive open blockchain token CANNOT receive a cash payment or share of profits from the developer or business. Therefore, due to the consumptive nature of such blockchain tokens they are properly classified as intangible personal property under Wyoming law.
Security Token Certificates
Separately, the Wyoming state legislature has introduced legislation which would allow the issuance of tokenized stock certificates using blockchain technology.
House Bill 185 entitled Corporate Stock Certificate Tokens proposes the use of tokenized digital share certificates in lieu of paper-based versions—specifically:
“the articles of incorporation or bylaws of a corporation may specify that all or a portion of the shares of the corporation may be represented by share certificates in the form of certificate token.”
The Regulatory Race Is On
Wyoming is certainly taking the lead with providing constructive regulation around digital assets. It will be interesting to see state versus federal dynamics in the US and how they evolve.
Yesterday I had meetings with principals of two of the largest crypto funds in the world — each of them stated that the most senior government officials (including a Head of State) had visited them to discuss the potential of blockchain technology. Some governments understand the power of this technology more than others.
One of the benefits of regulation in the EU is the ability to passport regulation across different EU states. This obviously creates regulatory harmony across a large economic area, but quite what that means with the backdrop of Brexit and continuing political disharmony across Europe remains to be seen.
But make no mistake — the race is on among nation states to attract innovation, human capital, and financial capital driven by blockchain.
Some jurisdictions see the power and potential of this technology more than others; Malta, Estonia, Luxembourg, and Switzerland in Europe have all been progressive, as have various regulators across Asia.
This will be a key theme of 2019.