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Wyoming Amends Certain State Laws to Exempt Virtual Currency and Digital Tokens
Practical Law Legal Update w-013-7393 (Approx. 5 pages)
Wyoming Amends Certain State Laws to Exempt Virtual Currency and Digital Tokens
by Practical Law Finance
| Published on 22 Mar 2018 • USA (National/Federal) |
The Wyoming state legislature passed three new bills that provide certain exemptions for virtual currency and blockchain tokens under Wyoming state law.
In early March 2018, the Wyoming state legislature passed three bills that provide certain exemptions for virtual currency and blockchain tokens under Wyoming state law.
Wyoming House Bill 19 (HB 19) incorporates virtual currency into the Wyoming Money Transmitter Act (the WMTA), exempting virtual currency from commerce and trade regulation within the state of Wyoming. The WMTA is used by the state to regulate the transmission of US legal tender within the state of Wyoming.
HB 19 directs the Wyoming state legislature to add the following definition of "virtual currency" to the definitions provided in the WMTA:
- Any type of digital representation of value that:
- is used as a medium of exchange, unit of account, or store value; and
- is not recognized as legal tender by the US government.
HB 19 excludes the following from enforcement under the WMTA:
- Buying, selling, issuing, or taking custody of payment instruments or stored value in the form of virtual currency.
- Receiving virtual currency for transmission to a location within or outside the US by any means.
Wyoming Senate File 111 (SF 111) makes amendments to the property tax rules set forth under the Wyoming Taxation and Revenue Act (WTRA) by adding exemptions for digital currencies. Under the WTRA, as amended by SF 111, money and cash on hand, including currency, gold, silver, other coins, bank drafts, certified checks, cashier's checks, and virtual currency, are exempt from property taxation.
Under SF 111, virtual currency means any type of digital representation of value that:
- Is used as a medium of exchange, unit of account, or store of value.
- Is not recognized as legal tender by the US government.
Note that SF 111 does not specify what "on hand" means for purposes of the treatment of virtual currency under the WTRA.
Wyoming House Bill 70 (HB 70) adds a new section to the Wyoming Securities Act (the WSA). The new section adds an open blockchain token exemption to securities regulation within the state. Under HB 70, a developer or seller of an open blockchain token shall not be deemed the issuer of a security under state law and shall not be subject to the provisions of the WSA if all of the following are met:
- The developer or seller of the token or the registered agent of the developer or seller files a notice of intent with the secretary of state.
- The purpose of the token is for a consumptive purpose, which shall only be exchanged for, or provided for the receipt of, goods, services, or content, including rights of access to goods or services or content.
- The developer or seller of the token did not sell the token to the initial buyer as a financial investment.
In order for the developer or seller to meet the financial investment criteria, the following must be met:
- The developer or seller did not market the token as a financial investment.
- One of the following is true:
- the developer or seller of the token reasonably believed that it sold the token to the initial buyer for a consumptive purpose;
- the token has a consumptive purpose that is available at the time of sale and can be used at or near the time of sale for use for a consumptive purpose;
- if the token does not have a consumptive purpose available at the time of sale, the initial buyer of the token is prevented from reselling the token until the token is available for use for a consumptive purpose; or
- the developer or seller takes other reasonable precautions to prevent buyers from purchasing the token as a financial investment.
The WSA is superseded federally by the US securities laws where applicable, limiting the scope of these amendments. However, the amendments to the WSA could be instructive to federal regulators or legislators crafting regulation or legislation designed to address initial coin offerings (ICOs) and digital token offerings.
Update: On March 8, 2018, Wyoming Governor Matt Mead signed HB 70 into law.